Corporate self-regulation of imperfect competition (Q6107393)

The substantive problem addressed by the authors is the problem of self-regulation of gigantic corporations, which are oligopolies, in order to bring their activities closer to neoclassical ideals -- perfect competition and privacy protection. The economic questions of pricing of their product and efficiency of its output also are considered in this paper. Particularly, `a fundamental question: can efficient production spontaneously arise from majority voting among shareholders and stakeholders?' The authors address these important questions of real economy within the famous Arrow-Debreu equilibrium model of an artificial economy where consumers are rational, know their utility functions, all the market prices and are able to independently maximize their utility by purchasing the products available to their budget (see, for example, [\textit{A. Kirman}, Hist. Polit. Econ. 38, 246--280 (2006; \url{doi:10.1215/00182702-2005-025}); \textit{V. Gorbunov}, MPRA Paper No. 115514 (2022)]. The fundamental question of the possibility of the efficient production spontaneously arising from majority voting among stakeholder is translated into the question about Pareto optimality of Cournot-Walras equilibrium allocation. The author's equilibrium model differs from the standard Arrow-Debreu in production side in view of the case of imperfect competition where rather big corporations have market power (their production outputs influence prices) and do not maximize their profits for fixed prices unlike the case of perfect competition. Accordingly, their profit functions need not be concave, and standard `profit maximization is typically not in the interest of the shareholders, and shareholders typically disagree on which production plan is best'. The authors investigate the mechanism of collective decision-making by majority vote to choose the firm's plans among shareholders and stakeholders, also perceived as consumers. Two types of voting procedure are considered: ``shareholder governance'' and ``stakeholder democracy''. Voting weights for shareholders equal to their shares in the firms, and each stakeholder has one vote. For each type of voting, the authors introduce a corresponding notion of `local Cournot-Walras equilibrium'. The first notion assumes that firms face a well-behaved inverse demand function, and the second notion is probabilistic in nature. Here, firms face a well-behaved random inverse demand function and the voters know the probability distribution on the Walrasian price vectors. Results on the existence of equilibrium for both notions and conditions providing Pareto optimality for equilibrium allocations are presented.