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
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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.
- JASKOLD GABSZEWICZ, Jean & VIAL, Jean-Philippe, .
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CORE Discussion Papers RP
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