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On the Theory of the Firm in an Economy with Incomplete Markets

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  • Steinar Ekern
  • Robert Wilson

Abstract

This article establishes conditions sufficient to ensure that a decision of a firm is judged to be desirable by any one shareholder (e.g., the firm's manager) if and only if every shareholder judges it to be desirable. One such condition is that the decision would not alter the set of distributions of returns available in the whole economy. Another is that shareholders are interested only in the mean and variance of the returns from their portfolios. The analysis allows for the possibility of incomplete markets.

Suggested Citation

  • Steinar Ekern & Robert Wilson, 1974. "On the Theory of the Firm in an Economy with Incomplete Markets," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 171-180, Spring.
    • Handle: RePEc:rje:bellje:v:5:y:1974:i:spring:p:171-180
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