Why So Much Consensus? Reciprocal Aggregation and the Duality Between Persons and Groups

Why do shareholders so often vote like one man in general assembly meetings? Unless markets are perfect, this challenges the conventional wisdom. We address this puzzle by proposing a general equilibrium notion of reciprocal aggregation: Firms aggregate the preferences of shareholders, and reciprocally shareholders aggregate the of perceived preferences (or beliefs) of …rms. We show how a mere Pareto condition for both aggregation mechanisms results in full alignment of shareholders, and restores the …rst welfare theorem even in case of severe market failures.

Please click here to download paper.