Uncertainty and insurance in strategic market games

Sonia Weyers ()
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Sonia Weyers: Graduate School of Business, Stanford University, Stanford, CA 94305-5015, USA

Economic Theory, 1999, vol. 14, issue 1, 201 pages

Abstract: For perfectly competitive economies under uncertainty, there is a well-known equivalence between a formulation with contingent goods and one with state-specific securities followed by spot markets for goods. In this paper, I examine whether this equivalence carries over to a particular form of imperfect competition. Specifically, I look at three Shapley-Shubik strategic market games: one with contingent commodities, one with Arrow securities traded under imperfect competition and one with Arrow securities traded under perfect competition. First I compare the feasibility constraints of these three games. Then I compare their equilibrium sets. As in Peck and Shell (1989), the only common equilibria between the first and the second game are those which involve no transfer of income across states. However, if the securities markets are competitive, then the set of equilibria of the contingent commodities game and the securities game coincide.

Keywords: Strategic; markets; games; ·; Organization; of; markets; under; uncertainty. (search for similar items in EconPapers)
JEL-codes: D40 D50 D80 (search for similar items in EconPapers)
Date: 1999-07-08
Note: Received: June 16, 1997; revised version: April 30, 1998
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Citations: View citations in EconPapers (9)

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