Credit market imperfections and the separation of ownership from control
Article Abstract:
A comparison of entrepreneurship and delegation of control effects in credit markets reveals that inefficiencies in equilibrium may arise in entrepreneur-run firms and that these inefficiencies may be overcome by delegating control. The study reveals that, in the presence of adverse selection and moral hazard, inefficiencies may be overcome by delegating control as managers are not the claimants of residual returns and thus have low powered incentives. These low powered incentives gives a good signal to credit markets and thus results in a lowering of capital prices.
Publication Name: Journal of Economic Theory
Subject: Economics
ISSN: 0022-0531
Year: 1998
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A dynamic model of differentiated oligopoly with capital accumulation
Article Abstract:
A dynamic model of differentiated oligopoly was developed in order to evaluate the capacity of firms to generate accumulate capital for manufacturing differentiated goods. The model dwells on the use of an open loop equilibrium wherein profit-maximizing firms operate under Bertrand or Cournot conditions. Results derived from the model revealed that social planning is a better alternative than any other oligopolistic regimes. provided that equilibrium is influenced by demand conditions.
Publication Name: Journal of Economic Theory
Subject: Economics
ISSN: 0022-0531
Year: 1998
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