Equilibrium, optimum, and prejudices in capital markets | Zendy

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Equilibrium, optimum, and prejudices in capital markets

Author(s) -

Borch Karl

Publication year - 1969

Publication title -

behavioral science

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.371

H-Index - 45

eISSN - 1099-1743

pISSN - 0005-7940

DOI - 10.1002/bs.3830140602

Subject(s) - simple (philosophy) , economics , competition (biology) , point (geometry) , microeconomics , mathematical economics , capital (architecture) , perfect competition , capital market , neoclassical economics , mathematics , finance , ecology , philosophy , epistemology , history , geometry , archaeology , biology

The behavioral assumptions which economists call “perfect competition,” imply that decentralized decision making under certain conditions leads to a social optimum. This is a central result of classical economic theory. The author discusses the result, and shows that it cannot be expected to hold when uncertainty is introduced. The point is illustrated by a simple example from business finance.

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