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Two-period economies with private state verification

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Author Info

  • Joao Correia-da-Silva

    () (CEF.UP and Faculdade de Economia, Universidade do Porto)

  • Carlos Herves-Beloso

    () (RGEA, Facultad de Economicas, Universidad de Vigo)

Abstract

Private state verification is introduced in a two-period economy with spot markets in both periods and complete futures markets for contingent delivery in the second period. Existence of equilibrium is established, under standard assumptions. An example is presented in which a complete set of contingent markets allows agents to arrive at the optimal allocation of risk-bearing, while securities are not sufficient.

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File URL: http://www.fep.up.pt/investigacao/workingpapers/10.05.05_wp374.pdf
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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 374.

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Length: 22 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:por:fepwps:374

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Related research

Keywords: General equilibrium; Asymmetric information; Private state verification; Two-period economies;

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References

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  1. Aldo Rustichini & Paolo Siconolfi, 2008. "General equilibrium in economies with adverse selection," Economic Theory, Springer, vol. 37(1), pages 1-29, October.
  2. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-78, May.
  3. Belen Jerez, 2005. "Incentive Compatibility and Pricing under Moral Hazard," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 28-47, January.
  4. Joao Correia-da-Silva & Carlos Hervés-Beloso, 2005. "Subjective Expectations Equilibrium in Economies with Uncertain Delivery," FEP Working Papers 190, Universidade do Porto, Faculdade de Economia do Porto.
  5. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  6. Alberto Bisin & Piero Gottardi, 1998. "Competitive Equilibria with Asymmetric Information," Levine's Working Paper Archive 2062, David K. Levine.
  7. Alberto Bisin & Piero Gottardi, 2006. "Efficient Competitive Equilibria with Adverse Selection," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 485-516, June.
  8. Allen, Beth E, 1981. "Generic Existence of Completely Revealing Equilibria for Economies with Uncertainty when Prices Convey Information," Econometrica, Econometric Society, vol. 49(5), pages 1173-99, September.
  9. Radner, Roy, 1972. "Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets," Econometrica, Econometric Society, vol. 40(2), pages 289-303, March.
  10. Prescott, Edward C & Townsend, Robert M, 1984. "Pareto Optima and Competitive Equilibria with Adverse Selection and Moral Hazard," Econometrica, Econometric Society, vol. 52(1), pages 21-45, January.
  11. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier.
  12. Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
  13. Jerez, Belén, 2005. "Incentive Compatibility and Pricing under Moral Hazard," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/5317, Universidad Carlos III de Madrid.
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Cited by:
  1. João Correia da Silva & Carlos Hervés-Beloso, 2012. "Existence and generic efficiency of equilibrium in two-period economies with private state-verification," FEP Working Papers 443, Universidade do Porto, Faculdade de Economia do Porto.

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