ON THE "UNANIMITY" LITERATURE AND THE SECURITY MARKET LINE CRITERION: A NOTE

This paper challenges recent results showing that under uncertainty firms can use the security market line criterion to evaluate investments in monopolised product markets. The paper looks at the simplest certainty case and shows mathematically and graphically that no unanirriously supported investment criterion can be derived to evaluate projects with monopoly power. Hence, they cannot possibly be derived on the more complicated uncertainty case, even given the restrictive assumptions necessary to derive the SML. Unanimity breaks down with monopoly power.