In an incomplete asset market, ﬁrms assign values to investment plans by projecting their payoﬀs on the span of the payoﬀs of marketed assets; equivalently, ﬁrms employ the Capital Asset Pricing Model. This is a criterion that does not require ﬁrms to possess information, such as the marginal valuation of revenue across date – events by shareholders, which is not observable; rather, it is based on information revealed by the prices and payoﬀs of marketed assets. Under standard assumptions, competitive equilibria exist. But, competitive equilibrium allocations need not satisfy a condition of constrained pareto optimality that recognizes the incompleteness of the asset market; and, even in the absence of nominal assets, competitive equilibrium allocations are generically indeterminate – they are determinate if ﬁrm consider the commodity payoﬀs of shares
De Waegenaere, A.; Polemarchakis, Heracles M.; and Ventura, L., "Asset Markets and Investment Decisions" (1997). Cowles Foundation Discussion Papers. 1395.