Allocational efficiency

Allocational efficiency

The effectiveness with which a market channels capital toward its most productive uses.

Allocational Efficiency

A condition in a market when all capital and other resources are assigned to projects with the highest profitability. Allocational efficiency is thought to benefit all economic actors to the greatest possible extent. In an environment of allocational efficiency, only the projects with the highest potential profitability receive funding and then only in the precise amount that is needed. Allocational efficiency assumes that the market is already informational and operationally efficient, that is, that all pertinent knowledge is public and non-income producing expenses (i.e. fees) are reasonably priced or non-existent. An allocatively efficient market has no imperfections and therefore does not exist in practice. However, markets can contain it to a greater or lesser extent. See also: Market failure.
References in periodicals archive ?
Allocational efficiency requires that resources are allotted to the most deserving and productive segment of the population.
We can also examine the allocational efficiency of our markets.
Another aspect of allocational efficiency is the proportion of eligible and ineligible shares held by the unrestricted investors.
Next we consider two null hypotheses relating to the allocational efficiency of the markets.
A "third way" as it was then styled, would walk a fine line between privileging markets and allocational efficiency at the cost of social justice on the one hand, and accepting less for everyone as long as the distribution was fair on the other.
The burden of addressing effectively the distributional effects of allocational efficiency will have to come from the governance arena that Vice Chancellor Strine left, not the one that has concerned him since joining the chancery court.
Conditional on the relative preset price and the policy instrument, consumption is determined by (22); the relative flexible price is determined by (14); allocational efficiency is determined by (18); and marginal cost is determined by (13) and (22).
But with stable prices, [pi] = 1, the derivative of allocational efficiency with respect to [p.
Financial markets, therefore, facilitate allocational efficiency.
From a welfare point of view, the financial system, through this price discovery function, allows capital to flow toward its most productive use and bring about allocational efficiency.
In the first study, the authors find that a computerized double auction performs better than the alternative institutions in terms of allocational efficiency and speed of price convergence, with the exception of possibly superior performance by a recontracting version of the clearinghouse institution.
It follows that allocational efficiency in the simple clearinghouse quickly approaches 100 percent as the number of traders increases.