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Incomplete Markets and the Firm

Author

Listed:
  • Dierker, E.
  • Dierker, H.
  • Grobal, B.

Abstract

In this paper we analyze the welfare properties of the set of Drèze equilibria for economies with incomplete markets and firms. The well known fact that a Drèze equilibrium need not be constrained Pareto optimal is often attributed to a lack of coordination between firms. We show that there are economies with a single firm in which no Drèze equilibrium is constrained Pareto efficient. Even a unique Drèze equilibrium need not be constrained Pareto efficient.

Suggested Citation

  • Dierker, E. & Dierker, H. & Grobal, B., 1999. "Incomplete Markets and the Firm," Papers 99-03, Carleton - School of Public Administration.
  • Handle: RePEc:fth:carlad:99-03
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    Cited by:

    1. Egbert Dierker & Hildegard Dierker & Birgit Grodal, 2002. "Nonexistence of Constrained Efficient Equilibria When Markets are Incomplete," Econometrica, Econometric Society, vol. 70(3), pages 1245-1251, May.
    2. Hervé Crès, 2000. "Majority Stable Production Equilibria: A Multivariate Mean Shareholders Theorem," Working Papers hal-00598173, HAL.
    3. Mario Tirelli, 2003. "Income taxation when markets are incomplete," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 26(2), pages 97-128, November.
    4. Hervé Crès & Mich Tvede, 2001. "Proxy fights in incomplete markets: when majority voting and sidepayments are equivalent," Sciences Po publications 726/2001, Sciences Po.
    5. Jean-Marc Bonnisseau & Oussama Lachiri, 2004. "A note on the Drèze’s criterion for large capitalist firms," Cahiers de la Maison des Sciences Economiques b04120, Université Panthéon-Sorbonne (Paris 1).

    More about this item

    Keywords

    ENTERPRISES ; ECONOMIC EQUILIBRIUM;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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