Abstract
The nonfinancial business sector presumably formulates its plans at time t so as to maximize its present value. Because the number of its equity shares outstanding at time t is given, this objective is tantamount to maximizing the price which those people who hold its shares at time t could receive for their shares if they were to sell them at time t. But, since all households are viewed as belonging to a single decision-making unit, any trading in existing shares at time t among households presumably fails to affect aggregate behavior. Consequently in this model the price of an existing share at time t remains a shadow price.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Anderson, W. H. Locke, 1979, “National Income Theory and its Price Theoretic Foundations” ( New York, McGraw-Hill )
Jorgenson, Dale, 1976, The Theory of Investment Behavior. in R. Ferber (ed.), “Determinants of Investment Behavior” ( New York: Columbia University Press )
Modiglioni, F. and M. Miller, 1958, The Cost of Capital, Corporation Finance, and the Theory of Investment, American Economic Review, 48: 261–97.
Sandmo, Agnar, 1971, Investment and the Rate of Interest, Journal of Political Economy, 1335–1345, Nov./Dec.
Saving, T. R, 1972, Transactions Costs and the Firm’s Demand for Money, Journal of Money, Credit, and Banking, 245–59, May.
Whitmore, H. W., 1975, A Temporal General Equilibrium Approach to the Firm’s Demand for Money, Southern Economic Journal, 42: 201–211.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 1986 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Whitmore, H.W. (1986). The Nonfinancial Business Sector in the Simple Model. In: Aggregate Economic Choice. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-70945-6_4
Download citation
DOI: https://doi.org/10.1007/978-3-642-70945-6_4
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-16162-2
Online ISBN: 978-3-642-70945-6
eBook Packages: Springer Book Archive