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The Relevance of Extrinsic Uncertainty

Author

Listed:
  • Heracles M. Polemarchakis

    (Department of Economics - Brown University, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain)

  • Luigi Ventura

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, Dipartimento di Scienze Economiche - UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome])

Abstract

Extrinsic uncertainty is effective at a competitive equilibrium. This is generically the case if commodities are exchanged indirectly, through the exchange of assets, spot markets are inoperative, while the asset market is incomplete. The structure of payoffs of assets may allow for non - trivial allocations invariant with respect to the extrinsic uncertainty, and the economy with a complete asset market may well have a globally unique competitive equilibrium. Competitive equilibrium allocations are constrained pareto optimal : effective extrinsic uncertainty is not disadvantageous, given the restricted set of assets available. Inoperative spot markets have a natural interpretation in economies with multiple periods: assets cannot be retraded.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Heracles M. Polemarchakis & Luigi Ventura, 1995. "The Relevance of Extrinsic Uncertainty," Working Papers hal-00607523, HAL.
    • Handle: RePEc:hal:wpaper:hal-00607523
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    Keywords

    Relevance; Extrinsic Uncertainty;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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