The relevance of extrinsic uncertainty

Heracles M. Polemarchakis and Luigi Ventura

No 691, HEC Research Papers Series from HEC Paris

Abstract: Extrinsic uncertainty is effective at a competitive equilibrium. This is generically the case if commodities are exchanged indirectly, through the exchange of assets, spot markets are inoperative, while the asset market is incomplete.

The structure of payoffs of assets may allow for non - trivial allocations invariant with respect to the extrinsic uncertainty, and the economy with a complete asset market may well have a globally unique competitive equilibrium.

Competitive equilibrium allocations are constrained pareto optimal : effective extrinsic uncertainty is not disadvantageous, given the restricted set of assets available.

Inoperative spot markets have a natural interpretation in economies with multiple periods: assets cannot be retraded.

Keywords: Extrinsic uncertainty; competitive equilibrium (search for similar items in EconPapers)
JEL-codes: D50 D52 D60 D84 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2000-01-01
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Related works:
Journal Article: The Relevance of Extrinsic Uncertainty (2001)
Working Paper: The Relevance of Extrinsic Uncertainty (2000)
Working Paper: The relevance of extrinsic uncertainty (1995)
Working Paper: The Relevance of Extrinsic Uncertainty (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:0691

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