In this paper, we study a pure exchange economy with idiosyncratic uncertainty, hidden action and multiple consumption goods.We consider two different market structures: contingent markets on the one hand, and financial and spot markets on the otherhand. We propose a competitive equilibrium concept for each market structure. We show that the equilibrium with contin-gent markets is efficient in an appropriate sense, while the equilibrium with financial and spot markets is inefficient, provided that assumptions on preferences more general than those usually considered in the literature hold.
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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
2006096.
Find related papers by JEL classification: D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
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