Abstract
This paper studies production decisions by firms in a capital market where decision-making by consumer-investors and the structure of equilibrium expected returns on securities are according to a twoparameter (mean-dispersion) model. An attempt is made to distinguish clearly questions concerned with the conditions requiredfor perfect competition among firms as issuers of securities from questions concerned with whether value maximizing production decisions by perfectly competitive firms are Pareto optimal. The two major findings are as follows. First, there are natural externalities in the production decisions offirms that could in principle prevent the capital market from being perfectly competitive. But it is argued that the available empirical evidence is consistent with the conditions required for perfect competition. Second, given a market that satisfies the conditions required for perfect competition, natural external economies in the production decisions of firms can prevent the allocations
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: The Bell Journal of Economics and Management Science
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
