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...

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Veröffentlicht in:Journal of mathematical economics 1990, Vol.19 (1), p.113-151
Hauptverfasser: Geanakoplos, J., Magill, M., Quinzii, M., Drèze, J.
Format: Artikel
Sprache:eng
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Zusammenfassung: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