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Markets and contracts

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  • Alberto Bisin
  • John Geanakoplos
  • Piero Gottardi
  • Enrico Minelli
  • Herakles Polemarchakis

Abstract

Economies with asymmetric information are encompassed by an extension of the model of general competitive equilibrium that does not require an explicit modeling of private information. Sellers have discretion over deliveries on contracts; this is in common with economies with default, incomplete contracts or price rigidities. Competitive equilibria exist and anonymous markets are viable. But, for a generic economy, there exist Pareto improving interventions via linear, anonymous taxes.

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Paper provided by European University Institute in its series Economics Working Papers with number ECO2010/29.

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Date of creation: 2010
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Handle: RePEc:eui:euiwps:eco2010/29

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Keywords: asymmetric information; competitive markets; equilibrium;

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