Voting in Assemblies of Shareholders and Incomplete Markets

An economy with two dates is considered, one state at the first date and a finite number of states at the last date. Shareholders determine production plans by voting - one share, one vote - and at ρ-majority stable stock market equilibria, alternative production plans are supported by at most ρ × 100 percent of the shareholders. It is shown that a ρ-majority stable stock market equilibrium exists if$\rho \geq \frac{S-J}{S-J+1},$where S is the number of states at the last date and J is the number of firms. Moreover, an example shows that ρ-majority stable stock market equilibria need not exist for smaller ρ's.