Green with envy: Implications for corporate investment distortions

Anand M. Goel, Anjan V. Thakor

Research output: Contribution to journalArticlepeer-review

18 Scopus citations

Abstract

We model agents whose preferences exhibit envy. An envious agent's utility increases with what he has and decreases with what others have. With this setup, we are able to provide a new perspective on the nature of investment distortions with centralized and decentralized capital budgeting systems. Centralized capital budgeting leads to corporate socialism in investments in multidivisional firms, whereas decentralized capital budgeting leads to overinvestment. Numerous additional testable predictions are also generated.

Original languageEnglish
Pages (from-to)2255-2287
Number of pages33
JournalJournal of Business
Volume78
Issue number6
DOIs
StatePublished - Nov 2005

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