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Incomplete markets, allocative efficiency and the information revealed by prices

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  • Alessandro Citanna
  • Antonio Villanacci

Abstract

In this paper we compare rational expectations equilibria with different degrees of information revelation through prices. These equilibria arise in a two-period exchange economy with finitely many states and signals, multiple commodities and incomplete f

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Paper provided by Carnegie Mellon University, Tepper School of Business in its series GSIA Working Papers with number 10.

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Handle: RePEc:cmu:gsiawp:10

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Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890
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  1. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-78, May.
  2. Magill, M. & Quinzii, M., 1988. "Real Effects Of Money In General Equilibrium," Papers 8826, Southern California - Department of Economics.
  3. Polemarchakis, H M & Siconolfi, P, 1993. "Asset Markets and the Information Revealed by Prices," Economic Theory, Springer, vol. 3(4), pages 645-61, October.
  4. Roy Radner, 1997. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Levine's Working Paper Archive 1594, David K. Levine.
  5. Atsushi Kajii & Antonio Villanacci & Alessandro Citanna, 1998. "Constrained suboptimality in incomplete markets: a general approach and two applications," Economic Theory, Springer, vol. 11(3), pages 495-521.
  6. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
  7. Hart, Oliver D., 1975. "On the optimality of equilibrium when the market structure is incomplete," Journal of Economic Theory, Elsevier, vol. 11(3), pages 418-443, December.
  8. Jordan, J. S., 1982. "The generic existence of rational expectations equilibrium in the higher dimensional case," Journal of Economic Theory, Elsevier, vol. 26(2), pages 224-243, April.
  9. Dubey, Pradeep & Geanakoplos, John & Shubik, Martin, 1987. "The revelation of information in strategic market games : A critique of rational expectations equilibrium," Journal of Mathematical Economics, Elsevier, vol. 16(2), pages 105-137, April.
  10. David Cass & Alessandro Citanna, 1998. "Pareto improving financial innovation in incomplete markets," Economic Theory, Springer, vol. 11(3), pages 467-494.
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Cited by:
  1. Andolfatto, David & Berentsen, Aleksander & Waller, Christopher, 2014. "Optimal disclosure policy and undue diligence," Journal of Economic Theory, Elsevier, vol. 149(C), pages 128-152.
  2. Juan Carlos Hatchondo, 2005. "The value of information with heterogeneous agents and partially revealing prices," Working Paper 05-06, Federal Reserve Bank of Richmond.
  3. Rohit Rahi & Piero Gottardi, 2007. "Value of Information in Competitive Economies with Incomplete Markets," FMG Discussion Papers dp596, Financial Markets Group.
  4. Krebs, Tom, 2005. "Fundamentals, information, and international capital flows: A welfare analysis," European Economic Review, Elsevier, vol. 49(3), pages 579-598, April.
  5. Banerjee, Anurag N. & Seccia, Giulio, 2002. "On the "Hirshleifer effect'' of unscheduled monetary policy announcements," Discussion Paper Series In Economics And Econometrics 0213, Economics Division, School of Social Sciences, University of Southampton.
  6. Broll, Udo & Eckwert, Bernhard & Eickhoff, Andreas, 2011. "Transparency in the banking sector," Dresden Discussion Paper Series in Economics 05/11, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  7. David Andolfatto & Fernando M. Martin, 2012. "Information disclosure and exchange media," Working Papers 2012-012, Federal Reserve Bank of St. Louis.
  8. Broll, Udo & Eckwert, Bernhard & Eickhoff, Andreas, 2012. "Financial intermediation and endogenous risk in the banking sector," Economic Modelling, Elsevier, vol. 29(5), pages 1618-1622.
  9. Drees, Burkhard & Eckwert, Bernhard, 2010. "Implications of more precise information for technological development and economic welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 34(2), pages 266-279, February.

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