Investment decisions and normalization with incomplete markets: a remark

Luigi Ventura

No 1998028, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Profit 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 e criteria are normalization dependent, i.e. their outcome depends on the good chosen to express individuals' marginal rates of substitution.

Keywords: investment decisions; normalization; incomplete markets (search for similar items in EconPapers)
JEL-codes: D52 D70 D81 L20 (search for similar items in EconPapers)
Date: 1998-05-01
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Citations: View citations in EconPapers (1)

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