The Objective of an Imperfectly Competitive Firm and Constrained Pareto Efficiency

Egbert Dierker, Hildegard Dierker and Birgit Grodal
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Egbert Dierker: Universitaet Wien
Hildegard Dierker: Universitaet Wien
Birgit Grodal: Kobenhavns Universitet

No 1383, Econometric Society World Congress 2000 Contributed Papers from Econometric Society

Abstract: We consider a simple model of a firm acting strategically on behalf of its shareholders. The price normalization problem arising in general equilibrium models of imperfect competition is overcome by using the concept of real wealth maximization. This concept is based on shareholders' aggregate demand and does not involve any comparison of utility profiles that shareholders can possibly obtain. In this paper we explore the efficiency properties of real wealth maximizing strategies for the group of shareholders.

Date: 2000-08-01

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