Chapter

Risk and Welfare, I: Private and Social Profitability

G. B. Richardson

in Information and Investment

Second edition

Published in print July 1997 | ISBN: 9780198292432
Published online November 2003 | e-ISBN: 9780191596810 | DOI: http://dx.doi.org/10.1093/0198292430.003.0010
 Risk and Welfare, I: Private and Social Profitability

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Consideration is given to how the response of individual firms to risk affects resource allocation in the economy as a whole. The private and social costs of over‐ and under‐investment are discussed. Differences between firms in borrowing power, sometimes represented as ‘imperfections in the capital market’, are evidence of the weighting system that the competitive economy employs to distribute the authority to allocate resources.

Keywords: capital market imperfections; over‐investment; the capital market; uncertainty; under‐investment

Chapter.  5322 words.  Illustrated.

Subjects: Microeconomics

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