The relevance of extrinsic uncertainty
AbstractExtrinsic uncertainty is effective at a competitive equilibrium. This is generically the case if commodities are exchanged indirectly, through the exchange of assets, spot markets are inoperative, while the asset market is incomplete. The structure of payoffs of assets may allow for non - trivial allocations invariant with respect to the extrinsic uncertainty, and the economy with a complete asset market may well have a globally unique competitive equilibrium. Competitive equilibrium allocations are constrained pareto optimal : effective extrinsic uncertainty is not disadvantageous, given the restricted set of assets available. Inoperative spot markets have a natural interpretation in economies with multiple periods: assets cannot be retraded.
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Bibliographic InfoPaper provided by HEC Paris in its series Les Cahiers de Recherche with number 691.
Length: 12 pages
Date of creation: 01 Jan 2000
Date of revision:
Extrinsic uncertainty; competitive equilibrium;
Other versions of this item:
- POLEMARCHAKIS, Heracles & VENTURA, Luigi, 1995. "The relevance of extrinsic uncertainty," CORE Discussion Papers, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1995081, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D60 - Microeconomics - - Welfare Economics - - - General
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
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- Pilegaard, Rasmus & Durré, Alain & Evjen, Snorre, 2003. "Estimating risk premia in money market rates," Working Paper Series, European Central Bank 0221, European Central Bank.
- Alain Durré, 2006. "The Liquidity Premium in the Money Market: A Comparison of the German Mark Period and the Euro Area," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 7, pages 163-187, 05.
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