Generic inefficiency of stock market equilibrium when markets are incomplete

If the asset market is incomplete, and if there are two or more consumption goods in each state of nature, then for fixed consumer preferences (of at least two agents), and fixed (non-trivial) technologies for the firm(s), and for a generic assignment of initial endowments, competitive equilibrium i...

Full description

Saved in:
Bibliographic Details
Published in:Journal of mathematical economics 1990, Vol.19 (1), p.113-151
Main Authors: Geanakoplos, J., Magill, M., Quinzii, M., Drèze, J.
Format: Article
Language:English
Subjects:
Consumption function
Economic models
Economic theory
Efficient markets
Equilibrium
Market equilibrium
Market value
Mathematics
Securities markets
Utility functions
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:If the asset market is incomplete, and if there are two or more consumption goods in each state of nature, then for fixed consumer preferences (of at least two agents), and fixed (non-trivial) technologies for the firm(s), and for a generic assignment of initial endowments, competitive equilibrium investment decisions are constrained inefficient. An outside agency can, simply by redirecting the investment decisions of firms and by lump sum transfers to individuals before the state of nature is realized, make all consumers better off.
ISSN:0304-4068
1873-1538
DOI:10.1016/0304-4068(90)90039-C