Are Incomlete Markets Able to Achieve Minimal Efficiency?
We consider economies with incomplete markets, one good per state, two periods, t=0,1, private ownership of initial endowments, a single firm, and no assets other than shares in this firm. In Dierker, Dierker, Grodal (2002), we give an example of such an economy in which all market equilibria are constrained inefficient. In this paper, we weaken the concept of constrained efficiency by taking away the planner's right to determine consumers' investments. An allocation is called minimally constrained efficient if a planner, who can only determine the production plan and the distribution of consumption at t=0, cannot find a Pareto improvement. We present an example with arbitrarily small income effects in which no market equilibrium is minimally constrained efficient.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Egbert Dierker & Hildegard Dierker & Birgit Grodal, 2000.
"Nonexistence of Constrained Efficient Equilibria when Markets are Incomplete,"
CIE Discussion Papers
2000-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- 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.
- Egbert Dierker & Hildegard Dierker & Birgit Grodal, 2001. "Nonexistence of constrained Efficient Equilibria when Markets are Incomplete," Vienna Economics Papers 0111, University of Vienna, Department of Economics.
- Edward C Prescott & Robert M Townsend, 1997.
"General Competitive Analysis in an Economy with Private Information,"
Levine's Working Paper Archive
1578, David K. Levine.
- Prescott, Edward C & Townsend, Robert M, 1984. "General Competitive Analysis in an Economy with Private Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 1-20, February.
- John Geanakoplos & Michael Magill & Martine Quinzii & J. Dreze, 1988.
"Generic Inefficiency of Stock Market Equilibrium When Markets Are Incomplete,"
Cowles Foundation Discussion Papers
863, Cowles Foundation for Research in Economics, Yale University.
- Geanakoplos, J. & Magill, M. & Quinzii, M. & Dreze, J., 1990. "Generic inefficiency of stock market equilibrium when markets are incomplete," Journal of Mathematical Economics, Elsevier, vol. 19(1-2), pages 113-151.
- Geanakoplos,Â J. & Magill, M. & Quinzii,Â M. & Dreze,Â J., . "Generic inefficiency of stock market equilibrium when markets are incomplete," CORE Discussion Papers RP 916, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- DHILLON, Amrita & MERTENS, Jean-FranÃ§ois, .
CORE Discussion Papers RP
1398, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Grossman, Sanford J., 1977. "A characterization of the optimality of equilibrium in incomplete markets," Journal of Economic Theory, Elsevier, vol. 15(1), pages 1-15, June.
- Gravel, Nicolas, 1994.
"On the Difficulty of Combining Actual and Potential Criteria for an Increase in Social Welfare,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
1994009, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Nicolas Gravel, 2001. "On the difficulty of combining actual and potential criteria for an increase in social welfare," Economic Theory, Springer, vol. 17(1), pages 163-180.
- Guesnerie, Roger, 1975. "Pareto Optimality in Non-Convex Economies," Econometrica, Econometric Society, vol. 43(1), pages 1-29, January.
- Harold L Cole & Edward C Prescott, 1997.
"Valuation equilibrium with Clubs,"
Levine's Working Paper Archive
912, David K. Levine.
- Peter M. DeMarzo, 1993. "Majority Voting and Corporate Control: The Rule of the Dominant Shareholder," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 713-734.
- Petra Geraats & Hans Haller, 1998. "Shareholders' choice," Journal of Economics, Springer, vol. 68(2), pages 111-135, June.
When requesting a correction, please mention this item's handle: RePEc:vie:viennp:0212. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paper Administrator)
If references are entirely missing, you can add them using this form.