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Incomplete Markets and the Firm

Author

Listed:
  • Egbert Dierker

    (University of Vienna)

  • Hildegard Dierker

    (University of Vienna)

  • Birgit Grodal

    (Institute of Economics, University of Copenhagen)

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

  • Egbert Dierker & Hildegard Dierker & Birgit Grodal, 1999. "Incomplete Markets and the Firm," Discussion Papers 99-03, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:9903
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/1999/9903.pdf/
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    Cited by:

    1. Hervé Crès, 2000. "Majority Stable Production Equilibria: A Multivariate Mean Shareholders Theorem," Working Papers hal-01064883, HAL.
    2. repec:hal:spmain:info:hdl:2441/10284 is not listed on IDEAS
    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. 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.
    6. repec:hal:spmain:info:hdl:2441/10282 is not listed on IDEAS
    7. 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.
    8. 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

    incomplete markets; firms' objectives; Drèze equilibria; efficiency;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D6 - Microeconomics - - Welfare Economics
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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