John Quiggin () (Department of Economics, University of Queensland) Robert G. Chambers () (Dept of Agricultural and Resource Economics, University of Maryland, College Park)
Additional information is available for the following
registered author(s):
Magill and Quinzii show that for any economy for which the state space is technological (the vector of firms' outputs distinguishes states), there is a security structure consisting of the riskless bond, the equity of each firm, an index of equity contracts and an appropriately-chosen family of options under which the market structure satisfies the First and Second Welfare Theorems. The object of the present paper is to extend the analysis of Magill and Quinzii to the case of a stochastic production function with multiple inputs. We show that the conflict between the market structure satisfies the First and Second Welfare Theorems if and only if, for each firm, the number of linearly independent combinations of securities having payoffs correlated with, but not dependent on, the firms output is equal to the number of degrees of freedom in the firm's production technology.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Risk and Sustainable Management Group, University of Queensland in its series Risk & Uncertainty Working Papers with number
WPR04_9.