Egbert Dierker (Universität Wien) Hildegard Dierker (Universität Wien) Birgit Grodal (University of Copenhagen, Institute of Economics)
Abstract
We consider economies with incomplete markets, one good per state, private ownership of initial endowments, a single firm, and no assets other than shares in this firm. In this simple framework, arbitrarily small income effects can render every market equilibrium resulting from some production decision constrained inefficient. Thus, even if all utility functions are approximately quasilinear, the stock market can be unable to achieve a constrained efficient allocation given the agents' characteristics. Moreover, the phenomenon persists when the efficiency requirements are substantially weakened.
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Publisher Info
Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number
01-11.
Length: 14 pages Date of creation: Sep 2001 Date of revision: Handle: RePEc:kud:kuiedp:0111
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
DHILLONÊ, Amrita & MERTENSÊ, Jean-Franois, 1993.
"Relative Utilitarianism,"
CORE Discussion Papers
1993048, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).