Efficiency of competitive equilibria with hidden action : the role of separable preferences
Abstract
In the present paper we study the efficiency properties of competitive equilibria in economies with hidden action and multiple goods. We borrow the description of the economy from Lisboa [3] and we apply a method of proof close in spirit to the one used in the literature on incomplete financial markets economies. We are then able to show that Lisboa's original result of constrained efficiency rests crucially on the assumption of separable preferences and on the structure of uncertainty.Download Info
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004019.Length:
Date of creation: 00 Apr 2004
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Handle: RePEc:cor:louvco:2004019
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Related research
Keywords: hidden action; separable preferences; constrained efficiency;Find related papers by JEL classification:
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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