Financial

Allocational efficiency

Allocational efficiency

The effectiveness with which a market channels capital toward its most productive uses.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive
These authorities tend to focus more on investor protection than on the allocational efficiency of the markets they oversee.
The entire scheme of priority sector lending in India is aimed at attaining greater allocational efficiency, thereby facilitating effective financial intermediation by banks.
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.
Allocational efficiency is reflected in the term [d.sub.t] [greater than or equal to] 1.
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).
When the issue is health insurance or retirement security, allocational efficiency is really not what's under discussion.
Tertiary education in Austria has been found costly and its allocational efficiency needs to be improved to cope with a widening gap in skills provided and demanded.
Second, the securities laws have the grand objective of nurturing the allocational efficiency of securities markets.
Financial markets, therefore, facilitate allocational efficiency. Risk-allocation mechanisms supported by well-functioning financial markets allow for diversification, hedging insurance and leveraging.
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.
Allocational efficiency depends in part on the relative bargaining strengths of the participants.
Copyright © 2003-2025 Farlex, Inc Disclaimer
All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional.