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

CRETA Online Discussion Paper Series from Centre for Research in Economic Theory and its Applications CRETA

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 JEL classification numbers: D52; D61 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:wcreta:12

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