Short Sales, Destruction of Resources, Welfare

Nikos Kokonas and Herakles Polemarchakis
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Nikos Kokonas: Department of Economics, University of Bath
Herakles Polemarchakis: Department of Economics, University of Warwick

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: A reduction in the output of productive assets (trees) in some states of the world can expand the span of payoffs of assets and, improved risk sharing may compensate for the loss of output and support a Pareto superior allocation. Surprisingly, if short sales of assets are not allowed, improved risk sharing that results from the destruction of output does not suffice to induce a Pareto superior allocation.

Keywords: short sales; destruction; welfare (search for similar items in EconPapers)
JEL-codes: D52 D61 (search for similar items in EconPapers)
Date: 2015
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