The Role of Asset Trade in Solving Coordination Problems

Jean-Marie Baland and Patrick Francois ()

Working Papers from Notre-Dame de la Paix, Sciences Economiques et Sociales

Abstract: Asset trading resolves coordination problems in most currently existing models of coordination failure. We argue that a principal limitation of these models is their ignoring idiosyncratic and aggregate uncertainty in investment returns. We introduce such uncertainty in a standard model of investment coordination while simultaneously closing down all other avenues leading to coordination failures.

Keywords: TRADE; INVESTMENTS (search for similar items in EconPapers)
JEL-codes: F19 (search for similar items in EconPapers)
Pages: 27 pages
Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:fth:nodapa:190

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