Corporate self-regulation of imperfect competition

We consider Cournot competition in general equilibrium. Decisions in firms are taken by majority voting. Naturally, interests of voters-shareholders or stakeholders-depend on their endowments and portfolios. Indeed, voters in every firm are concerned about the return on their portfolios rather than their shares in the firm. We introduce two notions of local Cournot-Walras equilibria to overcome difficulties arising from non-concavity of profit functions and multiplicity of equilibrium prices. We show existence of local Cournot-Walras equilibria, and characterize distributions of voting weights for which equilibrium allocations are Pareto optimal. We discuss the efficiency of various governance modes and highlight the importance of financial markets in regulating large firms.