A social welfare function characterizing competitive equilibria of incomplete financial markets
AbstractA classic characterization of competitive equilibria views them as feasible allocations maximizing a weighted sum of utilities. It has been applied to establish fundamental properties of the equilibrium notion, such as existence, determinacy, and computability. However, it fails for economies with missing ? nancial markets. We give such a characterization for economies with missing ?nancial markets, by an amended social welfare function. Its parameters capture both the relative importance of households?welfare?the classic weights?as well as the disagreements among them as to the value of the missing markets. As a by-product, we identify the dimension of the set of interior equilibrium allocations.
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Bibliographic InfoPaper provided by Brown University, Department of Economics in its series Working Papers with number 2008-10.
Date of creation: 2008
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Postal: Department of Economics, Brown University, Providence, RI 02912
incomplete markets; social welfare function; manifold;
Other versions of this item:
- Tirelli, Mario & Turner, Sergio, 2010. "A social welfare function characterizing competitive equilibria of incomplete financial markets," Research in Economics, Elsevier, vol. 64(1), pages 58-65, March.
- Mario Tirelli & Sergio Turner, 2008. "A social welfare function characterizing competitive equilibria of incomplete financial markets," Departmental Working Papers of Economics - University 'Roma Tre' 0093, Department of Economics - University Roma Tre.
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-21 (All new papers)
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