A social welfare function characterizing competitive equilibria of incomplete financial markets

Mario Tirelli () and Sergio Turner

Research in Economics, 2010, vol. 64, issue 1, 58-65

Abstract: A classic characterization of competitive equilibria views them as feasible allocations maximizing a weighted sum of utilities. It has been applied to establish fundamental properties of the equilibrium notion, such as existence, determinacy, and computability. However, it fails for economies with missing financial markets. We give such a characterization for economies with a single commodity and missing financial markets, by an amended social welfare function. Its parameters capture both the relative importance of households welfare, through the classic welfare weights, as well as the disagreements among them as to the value of the missing markets. As a by-product, we identify the dimension of the set of interior equilibrium allocations.

Keywords: Incomplete; markets; Social; welfare; function; General; equilibrium; Efficiency (search for similar items in EconPapers)
Date: 2010
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Working Paper: A social welfare function characterizing competitive equilibria of incomplete financial markets (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:64:y:2010:i:1:p:58-65

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