【歐洲央行】企業(yè)所有權(quán)與激勵性泄漏的宏觀經(jīng)濟學(xué)-2025

EUROPEANCENTRALBANK

EUROSYSTEM

WorkingPaperSeries

YunusAksoy,ArupDaripa,IssamSamiriFirmownershipandthe

macroeconomicsofincentive

leakages

No3033

Disclaimer:ThispapershouldnotbereportedasrepresentingtheviewsoftheEuropeanCentralBank(ECB).TheviewsexpressedarethoseoftheauthorsanddonotnecessarilyreflectthoseoftheECB.

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Abstract

Questionsaboutmarketpowerhavebecomesalientinmacroeconomics.Wecon-

sidertheroleofinstitutionalstructuresinaddressingthesewithinadynamicgeneralequilibriumframework.Standardmodelsaccountformonopolypro?tsasalump-sumtransfertotherepresentativeagent.Welabelthisan“incentiveleakage,”andshowthistobeageneralcharacteristicof?rm-optimalarrangements.Weshowthatshareholder-operatedorworker-operated?rmsthateliminateleakagecangeneratewithin-?rmin-centivesthatefectivelyreducemonopolydistortioninequilibrium.Whenall?rmsoperatesimilarly,anadditionalgeneralequilibriumefectarisesthroughinternaliza-tionofanaggregatedemandexternality.Wecharacterizesteady-statewelfareacrossstructures,andshowhowzero-leakageinstitutionsleadtoimprovementstowardstheGoldenRulebenchmark.Overall,ourpapertakesthe?rststeptowardsananalysisofthemacroeconomicsofinstitutionswithoutincentiveleakage.

Keywords:Monopolisticcompetition,incentiveleakage,aggregatedemandexter-nality,GoldenRule,patiencegap,monopolygap.

JELclassi?cations:E10,E22,E24,E25

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Non-technicalSummary

Inrecentdecades,asalientfeatureofcapitalisteconomieshasbeenadeclineinbusinessdynamismcharacterizedbyincreasedmarketconcentration,theriseofsuperstar?rms,apersistentincreaseinmark-ups.Atthemacroeconomicleveltheseaggregateintodecreasingshareoflabourand,withsomequali?cations,increasingshareofpro?tsingrossvalueaddedimplyinganincreaseinfactormarketine伍ciencies.Whilepolicymakersoftenaimtoinduce?rmstotakesocialwelfareintoaccount,theystruggletodeliverefectiveregulationtoaddressmarket-powerdistortions.Withthisinmind,welookforalternativesolutionsbasedoninstitutionalincentives.

Instandardrealbusinesscycle(RBC)modelswithmonopolisticcompetition,all?rmsareownedbytherepresentativehouseholdand?rmscanbethoughtofasbeingrunbyapro?t-maximisingmanageronbehalfofhouseholds.The?rmexploitsmonopolypowerinthefactormarkets,sothatlabourandcapitalareunderpaidrelativetotheirmarginalproduct.Theresultantmonopolypro?tsaretransferredbythemanagerasalump-sumpaymenttohouse-holds.Theseresidualpaymentsdonothaveanysubstitutionefectonfactorprovision,atbesthavinganincomeefect.Wede?nethisasan“incentiveleakage.”O(jiān)urcontributionistoembedalternativestructuresinanotherwisestandarddynamicgeneralequilibriummacroe-conomicmodelwithmonopolisticcompetition,characterisenoveloutcomesanddemonstratethatinstitutionalarrangementscanbeapotentchannelformitigatingdistortionsarisingfrommarketpower.Speci?cally,weconsiderthee伍cacyofzero-incentive-leakagestructures.

Ourapproachpreservesmonopolybuteliminatesleakagethroughalternativeownershipandremunerationstructures.Speci?cally,zeroleakageisachievedbydisbursingtheentire?rmrevenuenetofanynon-tiedfactorcostsaspaymenttotied-factorproviders.Thelatterareremuneratedinproportiontocontribution,andthe?rmaggregatestied-factorprovisioninadecentralisedmanner.Theproportionalremunerationschemegeneratesextracompetitionamongagentstosupplythetiedfactor(s).Thisresultsinawithin-?rmnegativeexternalitysothattiedfactorsareoversuppliedandthereforeoutputishigherrelativetothejointoptimumof?rmowners.Theoutcomeisasifthe?rmunder-exploitsitsmonopolypower.Firm-leveloverproductionresultsinapositiveexternalityonother?rms.Thus,ourdecentralisedzero-leakageschemesefectivelyinternaliseanaggregatedemandexternality.Theownershipandremunerationstructuresthatengendersuche伍caciouspropertiesarestableandindividualactionsareincentivecompatible.Ourresultsshowthatharnessingmonopolypro?tsaspartofsucharemunerationstructuregeneratesextraincentivesnotavailableunderperfect

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competition.Weproposedecentralisedzero-leakageinstitutionalformswitheithercapitalorlabourasthetiedfactor(EntrepreneurialShareholders(ES)andEntrepreneurialWorkers(EW),respectively).Wealsoconsiderthemoregeneralarrangementwithbothfactorstied(WorkersEnterprises).

Beyondspeci?cstructures,thebroaderideaistoshowtheroleofremunerationstructureinchanging?rmbehaviour,complementingtheliteratureonchanging?rmobjectives.Toconsiderwelfareimplicationsoftheproposedzero-leakagearrangements,werelyoncom-paringsteady-stateoutcomes,withthebenchmarkgivenbytheGoldenRule.WeshowthatrelativetotheperfectcompetitionRBCsetting,theGoldenRulerequiresthediscountfactortoapproachunity.Thiscreatestwosteady-statewelfaregaps:the?rstisbetweentheGoldenRuleandperfectcompetitionRBC(thepatiencegap)andthesecondisthestandardgapbetweenthelatterandRBCundermonopolisticcompetition(themonopolygap).WeshowthatEWclosespartofthemonopolygap,whileESandWEnotonlyclosethemonopolygap,butalsoclosepartofthepatiencegap,thusoutperformingevenperfectcompetitioninthesteadystate.Weshowformallythatthewelfarerankingisrelatedtocapitalaccumulationincentivesacrossstructures.Importantly,ESandWEstructuresrelyonthemonopolygaptogenerateextraincentivestosavecomparedtoperfectcompetition,allowingimprovementsbeyondthelatterinthesteadystate.

ES,EWandperfectcompetitionRBC(RBC-PC)modelsallfeaturezeroincentiveleak-age.ForRBC-PC,thisarisesthroughtheabsenceofmonopolypower,whileESandEWkeepmonopolypowerintactbutsetincentiveleakagetozerothroughrevenueallocationmechanisms.TheresultingincentivesdeliverhighersteadystatewelfarefortheES?rmascomparedtotheRBC-PCandlowersteadystatewelfarefortheEW?rmascomparedtotheRBC-PC.AfurtherinterestingobservationisthattheWorkersEnterprisesbehavesimilarlytotheES?rms.

Theresultsalsoservetohighlightthecontrastbetweenmanagerialanddecentralisedout-comesandindicatethateliminatingevenpartoftheincentiveleakagebymovingpartiallytowardsdecentraliseddecisionmakingcanhaveawelfare-enhancingimpactonthe?rm-leveloutcomes.Theyalsosuggestthatusingtaxpoliciestotarget?rmstructure,forexamplethroughpreferentialtaxtreatmentof?rmsthatlinkpro?tstofactorprovisionincentives,mighthaveamoredesirablelong-runimpactcomparedtocompetitionpoliciesthatseektolimitmonopolypower.

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1Introduction

Inrecentdecades,asalientfeatureofcapitalisteconomieshasbeenadeclineinbusiness

dynamism(AkcigitandAtes,

2021

,

DeLoecker,Eeckhout,andMongey,

2021)

.Itischarac-terizedbyincreasedmarketconcentrationinmostindustries,theriseofsuperstar?rms,apersistentincreaseinmark-upsaswellasanincreaseinmonopsonypowerinlabormarkets

.1

Atthemacroeconomicleveltheseaggregateintodecreasingshareoflaborand,withsomequali?cations,increasingshareofpro?tsingrossvalueadded

.2

Thesetransformationsimplygrowingfactormarketine伍ciencies.Usingamulti-sectormonopolisticcompetitionmodel,

Behrens,Mion,Murata,andSuedekum

(2020)computewelfaredistortionsassociatedwith

factormarketine伍cienciesoftheorderof6%to10%oftheUKandFrenchGDP.

Withtheriseinmarketpower,questionsaboutownershipstructureaswellasobjectiveof?rmshavebecomesalientacrosssocialsciences

.3

Theusualpracticefor?rms,especiallyintheUSandtheUK,istoactonbehalfofitsshareholders

.4

Thistypicallyimpliesex-ploitationofmarketpowertomaximisepro?ts,leadingtodistortionsinfactormarketsandmacroeconomicine伍ciencies.Sincethepioneeringworkof

Ward

(1958),alargeliteraturehas

addressedquestionsaboutimplicationsof?rmstructure,speci?callythee伍cacyofworker-operated?rms

.5

ImportantworkbySertel(1982,

1987

,

1991)hasshownthatintroducing

partnershipmarketscanresolveseveralconcernsraisedintheliteratureaboutincentivesinsuch?rms,thoughthequestionposedhereiswhetheralternativeownershipstructurescanperformaswellasastandardpro?t-maximising?rm.Afurtherstrandofliteratureseeks

1Forexample,

Philippon

(2019),

Eeckhout

(2021)notetheincreasedconcentration,

Autor,Dorn,Katz,

Patterson,andVanReenen

(2020)showtheriseofsuperstar?rms,

DeLoecker,Eeckhout,andUnger

(2020)

and

Guti/errezandPhilippon

(2017)notetheriseinmark-ups,

Manning

(2003)and

Benmelech,Bergman,

andKim

(2022)provideevidencefortheriseinmonopsonypower

.Certainwaysofaccountingforreturnon

capitalsuggestadeclineeveninthecapitalshareinUSgrossvalueadded(Barkai,

2020)andattheglobal

scale(Esfahani,Fernald,andHobijn,

2024)

.

2See,forexample,

Elsby,Hobijn,andSahin

(2013)and

Eeckhout

(2021)

.

3See,forexample,

Ferreras,Battilana,andM/eda

(2022),apartoftheDemocratizingWorkglobalinitia

-tive.

4Forexample,intheUS,Delawarelawpertainingto?rmmanagementgivesprimacytoshareholdersrights.

5Asubstantialbodyofempiricalworkconsidersfactorchoiceandallocationalimplicationsofalternativeownershipstructures.Theevidenceonstructuresuggeststhatcomparedtoconventional?rms,workers’enterprisesorcooperativesareatleastasproductive,notsmallerorlesscapitalized(e.g.

Fakhfakh,P/erotin,

andGago,

2012,

Burdin,

2014,

Mirabel,

2022)

.

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toalleviatedistortionsarisingfrompro?tmaximisationbyintroducinggreaterpro-sociality

intheobjectiveof?rmitself(Magill,Quinzii,andRochet,

2015

,

FleurbaeyandPonthi、ere,

2023)

.Theapproachinthesepapersistoassumeconsumers,workersandshareholdersasseparatestakeholderentities,andexplore?rmbehaviourifitweretomaximisestakeholderrights.Wediscussthesefurtherlater,buthereitsu伍cestonotethatourapproachalignswiththesebroadareasofenquiry.Inparticular,weshowthatcertainownershipandfactorremunerationstructurescanendogenouslyalterbehaviourof?rms,whichleadstolowermonopolywelfaredistortionsandinturnefectivelyinternalisesanaggregatepositiveexter-nality.Moreover,theproposedstructuresarestableinthesensethatresultingbehaviourisincentivecompatible.

Weconsideradynamicgeneralequilibriumsetting.Tomodel?rmswithmarketpower,weusethemonopolisticcompetitionframework、ala

DixitandStiglitz

(1977)

.6

Inageneralequilibriummodel,thereisnoseparationbetweenstakeholderssuchascapitalowners,work-ersandconsumers/savers(i.e.households).Thushouseholdutilityremainsthesolewelfarecriterion.Tomaximisepro?t,?rmswithmonopolypowerreducedemandforfactorstolimitoutput,sothatawedgearisesbetweenthemarginalproductofafactoranditsrealprice.Inthissetting,if?rmsweretoexploittheirmonopolypowerless,aggregateoutcomeswouldobviouslyimprove.Thebasicquestionweposeinthispaperishowthiscouldbeachievedinanincentivecompatiblemanner.

Whilepolicymakersoftenaimtoinduce?rmstotakesocialwelfareintoaccount,theystrug-gletodeliverefectiveregulationtoaddressmarket-powerdistortions.Withthisinmind,welookforalternativesolutionsbasedoninstitutionalincentives.Speci?cally,wetakebothimperfectcompetitionandstandardself-interestedrationalbehaviourasgivenandfocusonthepositiverolemonopolypro?tscanplayinincentivisingfactorprovisionthroughchangesintheownershipandremunerationstructuresatthe?rmlevel.Weshowhowtheseleadtoalowerefectiveexploitationofmarketpowerinequilibriumand,how,inturn,thisgivesrisetoanadditionalgeneralequilibriumefectthatenhancesmacroeconomicoutcomes.

Instandardrealbusinesscycle(RBC)modelswithmonopolisticcompetition,all?rmsare

6Thisensuresanalyticaltractabilityandallowscomparisonwithoutcomesofstandardrealbusinesscyclemodels.Asweexplainintheliteraturereview,ourmaininsightwouldcarryovertoanoligopolysettingaswell.Originally,theDixit-Stiglitzequationscaptureademandsystemwithpreferenceforvarietyand

monopolisticcompetition,andalargeliteratureexploitssuchfeatures(DhingraandMorrow,

2019,

Behrens

etal.,

2020)

.We,however,simplyusetheseequationstocapturetheproductionofa?nalgoodusingintermediategoods,wherethelattersectorfeaturesmonopolisticcompetitionamong?rms.

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ownedbytherepresentativehouseholdand?rmscanbethoughtofasbeingrunbyapro?t-maximisingmanageronbehalfofhouseholds.The?rmexploitsmonopolypowerinthefactormarkets,sothatlabourandcapitalareunderpaidrelativetotheirmarginalproduct.Theresultantmonopolypro?tsaretransferredbythemanagerasalump-sumpaymenttohouseholds.Theseresidualpaymentsdonothaveanysubstitutionefectonfactorprovision,

atbesthavinganincomeefect7

.Wede?nethisasan“incentiveleakage.”Thestandardmodelisusefulinthatitcapturesfactormarketdistortions,butitleavesopenthenormativequestionofthebestuseofmonopolypro?ts.Inthispaperweconsider?rmstructuresthateliminatethisleakage,andsystematicallyworkouttheimpactonindividual?rmsandonthegeneralequilibriumoutcome,andcharacterizethesigni?cantwelfareimplicationsthatemergefromthese.

Toproceed,weneedtounderstandwhetherlump-sumpro?tdistributionisjustamodel-closingassumptionorifincentiveleakageisamoregeneralphenomenon.Toapproachthisquestion,weassignaseparatemassofhouseholdstoeach?rm,clarifyingwhoownsthe?rm.Wethensolvetheproblemofa?rm-levelplannerwhomaximisestheutilityofowners,takingmarketpowerasgiven.Weshowthattheoptimalsolutionfeaturesanincentiveleakage.Moreover,ifthesolutionisimplementedusinginternalfactorprices,theleakagecoincideswiththelump-sumtransferunderpro?tmaximisation.Thus,changingtheobjectiveofthe?rmfrommaximisingpro?ttoutilitymaximisationdoesnotchangethenatureofthesolution,establishingincentiveleakageasadeeperphenomenonandallowingustoobtainageneralisedde?nitionthatdoesnotdependonmarketprices

.8

Next,wepropose?rm-levelinstitutionalstructuresthatcaneliminatetheincentiveleakagebyusingtheentire?rmrevenuetowardsfactorpayments.NotethattheperfectcompetitionRBCmodeldoesnotfeatureanyincentiveleakage,whilealsoeliminatingmarketpower.Ourstructures,ontheotherhand,eliminatetheleakagewhilekeepingmarketpowerun-changed.Ouranalysisthereforeleadstoacomparisonacrosszero-leakagesystems,eitherwithoutmarketpower(perfectcompetition)orwithunchangedmarketpower,butwithspeci?cownershipandremunerationstructures.Thattheformerimprovesonmonopolistic

7Hall

(1989)and

KarabarbounisandNeiman

(2018)interprettheseresidualpaymentsaspurepro?tsor

factorlessincome,re丑ectingthediferencebetweengrossrevenuesandthesumofmeasuredpaymentstorelevantproductionfactors.

Kalecki(1938,

1954)providesaclearde?nitionandseparationofworkers’and

capitalists’revenuestreamsinnationalincomeandtheirdirectassociationwithconsumptionandinvestment.

8HartandZingales

(2017)notethat?rmmanagershouldmaximiseshareholderutilityratherthanpro?t

.Ourresultshowsthatthetwoobjectivesproduceidenticaloutcomes.

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competitionisobvious.Moreinterestingly,weshowthatzero-leakageinstitutionalstructureswesuggestwithoutremovingmarketpoweralsoimprovesonmonopolisticcompetition,todiferentdegreesdependingonspeci?cfeatures.Essentially,ourpapertakesthe?rststeptowardsanalysingthemacroeconomicsof?rmswithoutincentiveleakageandclarifyingthesigni?cantimplicationsofthisfeatureforaggregatewelfare.Thisisthemaincontributionofourpaper.

Letuselaborateontheideaofzeroleakageundermonopolistic?rms.Inthe?rm-levelplanner’sexercisementionedabove,ownerssupplybothcapitalandlabourtothe?rm.However,otherintermediatearrangementsarepossible.Forexample,ifhouseholdswhoowna?rmsupplycapitalexclusivelytothe?rm,whilelabourishiredinaneconomy-widemarket,wesaythatcapitalisthetiedfactor,whilelabourisnottiedtoanyspeci?c?rm.Inthiscase,the?rm’ssurplusistherevenuenetofpaymentstolabour.Weshowthatthe?rmwouldoptimallyexploititsmarketpowerinhiringlabourinthesamewayasapro?t-maximising?rm,introducingthesamewedgebetweentherealwageandthemarginalproductoflabour.Thenetsurplusafterpayinglabouristhenpaidtothetiedfactor,capitalinthisexample.Householdsarepaidashareofthesurplusinproportiontotheircontributiontototalcapital.Theremunerationschemeimpliesthatthemorecapitalahouseholdsupplies,thegreaterthefractionoffuturesurplustheycapture.Inotherwords,themassofhouseholdsassignedtoa?rmcompeteinternallyforsharesofthesurplus.

The?rm’sdecisionmakingisdecentralised:capitalemployedbythe?rmissimplythetotalcapitalsuppliedbyitsowners.Toputitdiferently,onceweassignownershipofa?rmtoacertainmassofhouseholds,weassumethattheysupplytiedfactorsbasedonindividualincentives,andthetotal?rmdemandforthetiedfactorsimplyaggregatesacrossindividualdecisions;thereisnocentralisedmanagertodecidefactorprovision.Ourresultsthereforealsoservetohighlightthecontrastbetweenmanagerialanddecentralisedoutcomes,andindicatethateliminatingevenpartoftheleakagebymovingpartiallytowardsdecentraliseddecisionmakingcanhaveanimpacton?rm-leveloutcomes.

Wedenotethearrangementabovewithcapitalasthetiedfactoras“EntrepreneurialShare-holders(ES).”Similarly,weconsideran“EntrepreneurialWorkers(EW)”arrangementwherelabouristhetiedfactor.Weshowthattheutilitymaximisingsolutioninthesecasesisequivalenttomaximisingsurplusafterpayingthenon-tiedfactor.Thatis,theinformationrequirementforthesecasesisminimal.

Thebasicintuitionfortheaggregateimpactofeliminatingincentiveleakageisasfollows.The

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remunerationschemespromotesinternalcompetitionamongtied-factorproviders.Whencapitalisthetiedfactor,provisionofextracapitalbyanyhouseholdimposesanegativeexternalityonotherssinceitreducestheshareoftotalcapitalprovisionofothers.Thisimpactisnotinternalised,leadingtoover-provisionofcapitalrelativetothejointoptimumofownersandconsequenthigheroutput,which,inturn,hasapositiveexternalityonother?rms.Thuswithin-?rmnegativeexternalitiesleadtoapositiveaggregatedemandexter-nality.Inotherwords,theinternalstructureofthe?rmcan,byitself,efectivelyreducetheexploitationofmarketpowerinequilibrium,inturninternalisinganaggregatedemandexternality.

Tounderstandthee伍ciencyimpactoftheaggregateexternality,letus?rstclarifyourwelfarenotion.Policyistypicallyevaluatedusingadynamicwelfarecriterion:changeinlifetimeutilitystartingattheinitialperiod(theperiodwhenapolicyisintroduced).Whileitservestounderstandtheimpactoverbusiness-cyclefrequencies,thismaynotbebestsuitedtoevaluateapermanentchangeininstitutionalstructure,whichinsteadcallsformeasuringlong-termimpact.Sinceourdynamicgeneralequilibriummodelcanbethoughtofasagrowthmodelwithzerogrowth,wecancharacterizethecorrespondingsteady-stateoutcometomeasurelong-termimpact.Crucially,thesteady-statewelfarebenchmarkisnotthesameasthedynamicwelfarebenchmark.Thelatterisaddressedbythe?rstwelfaretheorem,whichimpliesthatstartingattheinitialperiod,lifetimeutilityishighestunderperfectcompetitionRBC(RBC-PC),inturnimplyingthatanychangeininstitutionalstructureornatureofcompetitionwouldproducelowerdynamicwelfare.Ontheotherhand,thesteady-statebenchmarkingrowthmodelsisgivenbytheGoldenRule,whichisachievedunderperfectcompetitionRBCinthelimitasthehouseholddiscountfactorapproachesunity.

Theupshotisthatgivenanydiscountingoffutureutility,wehaveagapbetweenthesteady-stateGoldenRulebenchmarkandwelfareunderperfectcompetitionRBC(patiencegap).OfcoursewealsohavetheusualwelfaregapbetweenperfectandmonopolisticcompetitionRBC(monopolygap)

.9

Figure

1

showsthegaps.Wepresentageneralpossibilityresulttoshowthat,atthesteadystate,zero-leakagesystemscannotonlyclosethemonopolygap,butcanoutperformperfectcompetitionRBCbyclosingpartofthepatiencegap.Wefurtherexplainthecrucialroleplayedbycapitalprovisionincentivesinthisprocess.

Ourresultsshowthatoverastandardrangeofparametervalues,theinstitutionalformwith

9Thisgapobtainsbothdynamicallyandinthesteadystate.Weconsiderthelatterhere.

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Figure1:Twinwelfaregapsinthesteadystateasfunctionsofmarketpower,whichisdecreasingintheparameterε.Theschematicisbasedonsimulationspresentedlater,featuringvaluesofεbetween6and20.WeshowthatperfectcompetitionRBCachievestheGoldenRuleifandonlyifthediscountfactorβ→1.Foranygivenβ<1,thereisasteady-state“patiencegap.”Further,thestandarddistortionunderRBCwithmonopolisticcompetitiongivesrisetothe“monopolygap.”GreatercapitalaccumulationincentivesunderESimplythatitclosesnotonlythemonopolygap,butpartofthepatiencegap,thusoutperformingperfectcompetitionRBCinthesteadystate.

labourasthetiedfactor(EntrepreneurialWorkers,orEW)produceswelfarethatishigherthanRBCwithmonopolisticcompetition,butlowerthanperfectcompetitionRBC.Thatis,EWeliminatespartofthemonopolygap.Ontheotherhand,theinstitutionalformwithcapitalasthetiedfactor(EntrepreneurialShareholders,orES)notonlyclosesthemonopolygapfully,buteliminatesevenpartofthepatiencegap(seeFigure

1)

.Theresultsdemonstratethatpro?tsarisingfromimperfectcompetitioncanbeharnessedtoproducepowerfullong-termincentives.

Thefactthatsteady-statewelfarelevelsfromESandEW?tneatlyontwosidesofthelevelfromRBC-PC(seeFigure

1)isnotacoincidence

.Asmentionedpreviously,allthreearezero-leakageinstitutions.RBC-PCeliminatesleakagebyremovingmonopolypower,whileESandEWkeepmonopolypowerintactbutsetleakagetozerothroughrevenueallocationmechanisms.AsweclarifyinSection

6.2

,theresultingdiferencesincapital-provisionincentivespushESandEWindiferentdirectionsrelativetoRBC-PC.

Finally,weanalysethecaseofaWorkers’Enterprise,withbothfactorstiedtothe?rm.Thisisa?rmownedbyitsworkers.Underazero-leakagescheme,the?rmoptimallyallocatessharesofrevenuetoeitherfactor,beforeremuneratingthefactor-providers.Eachowneristhenremuneratedforeitherfactorinproportiontotheircontributiontototalsupply

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ofthatfactor.ThisisamoregeneralarrangementcomparedtoESandEW,asthe?rmcansetthesharestoimitateeithercase.Whiletheanalysisistechnicallychallenging,theresultsdonotaddnewinsightsabouttheaggregateimpactof?rm-levelincentives.Steady-statesimulationsshowthatforastandardrangeofparametervalues,theoptimalstructureoftheWEisclosetoES.Thisraisesadiferentquestion.Since?rmsdonotsetouttoconsideraggregateexternalitiesinchoosinginternalstructure,whydotheyoptimallychooseastructureclosetotheonethatgenerateshighaggregatesteady-statewelfare?WeclarifytheintuitioninSection

7

.

Takentogether,ourresultsshowthatwhethergreatermarketpowerleadstogreaterin-e伍ciencydependsontheinstitutionalstructure.Whilecompetitionpolicytypicallyaimstocurbmarketpower,ourworkshowsthescopeforalternativesche