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- Title
Endogenous Equity Shares in Cournot Competition: Welfare Analysis and Policy.
- Authors
Kanjilal, Kiriti; Muñoz-García, Félix
- Abstract
We consider a duopoly in which firms can strategically choose equity shares on their rival's profits before competing in quantities. We identify equilibrium equity shares, and subsequently compare them against the optimal equity shares that maximize social welfare. Most previous studies assume that equity shares are exogenous, and those allowing for endogenous shares do not evaluate if equilibrium shares are socially excessive or insufficient. Our results also help us identify taxes on equity acquisition that induce firms to produce a socially optimal output without the need to directly tax output levels.
- Subjects
POLICY analysis; PUBLIC welfare policy; TAX incidence; HUMANITARIANISM; STOCKS (Finance)
- Publication
B.E. Journal of Economic Analysis & Policy, 2020, Vol 20, Issue 1, pN.PAG
- ISSN
2194-6108
- Publication type
Article
- DOI
10.1515/bejeap-2018-0085