A Theory of Optimal Expropriation , Mergers and Industry Competition ∗

@inproceedings{Bris2006ATO,
  title={A Theory of Optimal Expropriation , Mergers and Industry Competition ∗},
  author={Arturo Bris},
  year={2006}
}
  • Arturo Bris
  • Published 2006
We model a competitive industry where managers choose quantities and costs to maximize a combination of firm profits and private benefits from expropriation. Expropriation is possible because of corporate governance ‘slack’ permitted by the government. We show that corporate governance slack induces managers to choose levels of output and costs that are higher than would otherwise be optimal. This, in turn, benefits consumers because the equilibrium price is lower. The model shows that for… CONTINUE READING