Investment Decisions and Normalization with Incomplete Markets: A Pitfall in Aggregating Shareholders' Preferences
AbstractProfit maximization is not a well defined objective when markets are incomplete. Several criteria of investment choice have therefore been put forward in the literature, some of which crucially hinge upon aggregation of shareholders' preferences, as is the case with the criteria proposed by Dreze (1974) and Grossman and Hart (1979). This note shows that these criteria are normalization dependent, i.e., their outcome depends on the good chosen to express individuals' marginal rates of substitution.
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Bibliographic InfoArticle provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.
Volume (Year): 3 (2004)
Issue (Month): 1 (April)
investment decisions; normalization; incomplete markets;
Find related papers by JEL classification:
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Oligopoly "A la cournot" in a general equilibrium analysis,"
Journal of Economic Theory,
Elsevier, vol. 4(3), pages 381-400, June.
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- DeMarzo, Peter M, 1993. "Majority Voting and Corporate Control: The Rule of the Dominant Shareholder," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 713-34, July.
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