Enrique Arzac

Class Shares and Economies of Scope

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.

Source: Journal of Economic Theory
Exact Citation:
Arzac, Enrique. "Class Shares and Economies of Scope." Journal of Economic Theory 54, no. 2 (August 1991): 448-59.
Volume: 54
Number: 2
Pages: 448-59
Date: 8 1991