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5

Examples where this happens are always extreme and contrived. I can think of two kinds of examples. The first is where you have an asset that for some reason has a price of zero or negative but a positive payoff in some states (perhaps no other asset pays off in that state). The second is where you have two assets with positive prices that have negative ...


4

It is beneficial (at least, mostly beneficial). Investments are risky, and business projects fail all the time at no fault of the entrepreneur. By bounding the risk profile of corporations, you give incentives for more people to start a business and look out for funding. Let me explain myself with a super simple example. Suppose there was a project that has ...


4

O'Sullivan & Hilliard write: Consumer surplus is a "type of non-financial loss" and can be defined as the amount by which the particular plaintiff values performance of a particular obligation over and above its market value. This is identical to the economist's definition of consumer surplus. Using Pindyck and Rubinfeld's example: If a student was ...


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