Where G is the geometric mean rate of return on the individual's net worth. W,k is the kth individual's initial wealth. Using this approximation, the market price of risk, 4)-1, is equal to HaIM. The inclividual investor's risk aversion is W11,-1, E(1 R1,) _ W*1,k, and HaIM (I W*1k)l. k Under the assumption that expected future prices are independent of current prices, the market price It may be noted that the Bernoulli utility function, unlike the quadratic and exponential utility of risk is unaffected by changes in the number of investors.

A PREVIOUS paper [9] developed a model of the structure of equilibrium prices for risk assets in a purely competitive in which a set of individually risk averse investors optimize their respective portfolios of risk assets in terms of common expectations and risk assessments with respect to a common horizon. When there is a riskless asset available for holding or borrowing at a fixed interest return and all probability assessments are normal (Gaussian) it was shown that in equilibrium a purely competitive will place an aggregate value on all the outstanding stock of any company V0j equal to the discounted value at the riskless rate r* of the certainty equivalent of -the distribution of its uncertain end-of-period aggregate value. This in turn is less than the statistical expectations V1* by the product of the market price of dollar

John Lintner, The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets, The Review of Economics and Statistics, Vol. 47, No. 1 (Feb., 1965), pp. 13-37

John Lintner, J. Keith Butters, The Lintner-Butters Analysis of the Effect of Mergers on Industrial Concentration, 1940-1947: Rejoinder to Dr. Weston, The Review of Economics and Statistics, Vol. 33, No. 1 (Feb., 1951), pp. 73-75

John Lintner, J. Keith Butters, The Lintner-Butters Analysis of the Effect of Mergers on Industrial Concentration, 1940-1947: Rejoinder to Drs. Blair and Houghton, The Review of Economics and Statistics, Vol. 33, No. 1 (Feb., 1951), pp. 67-71

T HIS article reports the results of a statistical analysis of the merger movement in the United States since I94o.' Merger activity has long been recognized as having a major impact on the competitive structure of the American economy.2 It is also generally recognized that the high degree of industrial concentration which characterizes our economy today stems largely from the two waves of merger activity in the late nineteenth century which were typified by the formation of the Standard Oil Trust in I879 and, later, of the billion dollar United States Steel Corporation at the turn of the century. The major merger movement of the I920'S still further increased prevailing levels of concentration. With these historical precedents and in the face of the already high degree of industrial concentration illustrated by Chart I,3 the resurgence of large-scale merger activity in the United States since I940 raises issues of major national importance. In manufacturing and