Controlled-by-owner Firms, Mobility of Capital and Microeconomic Profit Rate Maximization

Louis de Mesnard

No 9901, LATEC - Document de travail - Economie (1991-2003) from LATEC, Laboratoire d'Analyse et des Techniques EConomiques, CNRS UMR 5118, Université de Bourgogne

Abstract: When they actively control the firm, owners select the firm that has the best profit rate if the hypothesis of mobility of capital is adopted: controlled-by-owner firms are profit-rate-maximizing when sleeping-owner firms are pure-profit-maximizing. Both types are compared in monopoly, in perfect competition, in classical or in mixed duopoly. Always, controlled-by-owner firms have a lower output than comparable sleeping-owner firms. It only takes a fixed coefficient of equity capital to do that price plays no role for controlled-by-owner firms in perfect competition; in duopoly, it only takes a similar condition plus a linear demand to do that reaction functions vanish. and supply driven models) and the effect of an exogenous factor (final demand or added-value). The note recalls that another method is possible, the comparison of the stability of technical and allocation coefficients, generalized by the biproportional filter: if for a sector, after biproportional filtering, column coefficients are more stable than row coefficients, then this sector is declared as not supply-driven (but one cannot decide that it is demand-driven anyway), and conversely...

Keywords: Profit Rate; Firm; Control; Coordination; Objective (search for similar items in EconPapers)
JEL-codes: D21 D24 D41 D42 D43 L13 L21 (search for similar items in EconPapers)
Pages: 29 pages
Date: 1999-03
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Working Paper: Controlled-by-owner firms, mobility of capital and microeconomic profit rate maximization (1999)
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