"Class Shares and Economies of Scope"
Journal of Economic Theory,
Volume: 54 | Issue: 2 | Pages: 448-59
Publication type: Journal article
This paper examines the allocative role of class shares that pay dividends based upon the performance of the individual activities of multi-activity firms. The firms considered operate under economies of scope and technological uncertainty in an incomplete asset market. Investor unanimity about the choice of production plans and a constrained Pareto optimum are attained when all firms in the economy issue a class of shares for each of their activities. Partial issuance of class shares leads to a Pareto superior allocation if the ensuing changes in production plans are individually rational.
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