Hostname: page-component-848d4c4894-xfwgj Total loading time: 0 Render date: 2024-06-29T01:55:46.051Z Has data issue: false hasContentIssue false
  • English
  • Français

Private Benefits and Product Market Competition

Published online by Cambridge University Press:  09 January 2015

Jacques Thépot
Get access

Summary

The impact of private benefits extraction on the values of oligopolistic firms is analyzed. Private benefits are assumed to generate costs which are passed through the organizational structure and create price distortion in the downstream product market. We prove that this may affect the profit (i.e. the market value) of the firms in a positive sense since the intensity of rivalry is curbed by the cost increase.

In oligopoly, private benefits extraction may enhance the profits while still generating a welfare loss: this suggests that corporate governance cannot be divorced from competition policy in industries where managerial opportunism generates expropriation costs.

Cet article traite de l'influence des bénéfices privés sur la valeur des entreprises en situation d'oligopole. Les bénéfices privés sont supposés générer des coûts qui sont transmis à travers la structure organisationnelle. Ils créent ainsi des distorsions de prix sur le marché de produits en aval. Nous montrons que cela peut affecter positivement le résultat (c'est-à-dire la valeur de marché) des entreprises puisque l'intensité de la concurrence est réduite par l'augmentation des coûts unitaires. En situation d'oligopole, l'extraction des bénéfices privés peut améliorer les profits tout en induisant une perte de bien-être : cela suggère que la gouvernance d'entreprise ne peut pas être dissociée de la politique de la concurrence, dans les secteurs où l'opportunisme managérial se traduit par des coûts d'exploitation.

Keywords

Private BenefitsOligopolyAgency CostG38D43bénéfices privésoligopolecoût d’agenceG38D43
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 79 , Issue 3 , September 2013 , pp. 5 - 24
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

EM Strasbourg Business School, LARGE, 61, avenue de la Forêt Noire, 67085 Strasbourg cedex, France, e-mail : thepot@unistra.fr, August 14, 2013.

References

Aggarval, R. K., Samwick, A. (1999), “Executive Compensation, strategic competition, and relative performance evaluation: theory and evidence,” The Journal of Finance, 54, pp. 1999–2042.Google Scholar
Allen, R, Gale, D. (2000), “Corporate Governance and Competition”, in Vives, X. (ed.)., Corporate Governance: Theoretical and Empirical Perspectives, Cambridge, UK, Cambridge University Press, pp. 23–94.Google Scholar
Alles, M., Datar, S. (1998), “Strategic transfer pricing,” Management Science, 44, pp. 451–461.Google Scholar
Brisley, N., Bris, A. and Cabolis, C. (2011), “A theory of optimal expropriation, mergers and industry competition,” Journal of Banking & Finance, 35, pp. 955–965.Google Scholar
Ang, J.S., Cole, R.A. and Wuh Lin, J. (2000), “Agency costs and ownership structure.” Journal of Finance, 55, pp. 81–106.Google Scholar
Bonanno, G. and Vickers, J. (1988), “Vertical separation,” Journal of Industrial Economics 36, pp. 257–263.Google Scholar
Buccirossi, P., Spagnolo, G. (2007), “Corporate governance and collusive behavior,” CEPR, WP 6349.Google Scholar
Deneckere, R., Davidson, C. (1985), “Incentive to form coalitions with Bertrand competition,” Rand Journal of Economics, 16, pp. 473–486.Google Scholar
Fershtman, C, Judd, K. (1987), “Equilibrium incentives in oligopoly,” American Economic Review 77, pp. 927–940.Google Scholar
Fudenberg, D., Tirole, J. (1991), Game theory, MIT Press.Google Scholar
Greenhut, M., Ohta, H. (1979), “Vertical integration of successive oligopolists,” American Economic Review, 69, pp. 137–141.Google Scholar
Hart, O. (1983), “The market mechanism as an incentive scheme,” Bell Journal of Economics, 14, pp. 366–382.Google Scholar
Jensen, M., Meckling, W. (1976), ‘Theory of the firm: managerial behavior, agency cost and ownership structure,” Journal of Financial Economics, 3, pp. 305–360.Google Scholar
Motta, M., Polo, M. (2003), “Leniency programs and cartel prosecution,” International Journal of Industrial Organization, 21, pp. 347–379.Google Scholar
Salant, S., Switzer, S., and Reynolds, P. (1983), “Losses due to merger: the effects of an exogenous change in industry structure on Cournot-Nash equilibrium,” Quarterly Journal of Economics, 48, pp. 183–200.Google Scholar
Szimanski, S. (2000), “Strategic delegation with endogenous costs. A duopoly with wage bargaining,” International Journal of Industrial Organization, 12, pp. 105–112.Google Scholar
Thépot, J., Netzer, J.L. (2008), “On the optimality of the full cost pricing,” Journal of Economic Behavior and Organization, 68, pp. 282–292.Google Scholar
Tirole, J. (2006), The Theory of Corporate Finance, Princeton University Press.Google Scholar