Objectives of an Imperfectly Competitive Firm: A Surplus Approach

  • Egbert Dierker
  • Hildegard Dierker
  • Birgit Grodal
Chapter

Abstract

We consider a firm acting strategically on behalf of its shareholders. The price normalization problem arising in general equilibrium models of imperfect competition can be overcome by using the concept of real wealth maximization. This concept is based on shareholders’ aggregate demand and does not involve any utility comparisons. We explore the efficiency properties of real wealth maxima for the group of shareholders. A strategy is called S-efficient (S stands for shareholders) if there is no other strategy such that shareholders’ new total demand can be redistributed in a way that all shareholders will be better off. Our main result states that the set of real wealth maximizing strategies coincides with the set of S-efficient strategies provided that shareholders’ social surplus is concave. Thus, even if a firm does not know the preferences of its shareholders it can achieve S-efficiency by selecting a real wealth maximizing strategy.

Keywords

Manifold Income Oligopoly 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2001

Authors and Affiliations

  • Egbert Dierker
    • 1
  • Hildegard Dierker
    • 1
  • Birgit Grodal
    • 2
  1. 1.Institut für WirtschaftswissenschaftenUniversität WienWienAustria
  2. 2.Centre of Industrial Economics and Økonomisk InstitutKøbenhavns UniversitetKøbenhavnDenmark

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