Incomplete Markets, Allocative Efficiency, and the Information Revealed by Prices

Alessandro Citanna () and Antonio Villanacci
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Alessandro Citanna: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: We compare rational expectations equilibria with different degrees of information revelation through prices. These equilibria arise in a two-period exchange economy with finitely many states and signals, multiple commodities and incomplete financial markets for nominal assets. We show that there are always equilibria where information is redundant in the sense of being of no value to the uninformed traders. We give conditions under which for a generic set of economies, parametrized by endowments and utilities, there exist open sets of equilibria for which allocative and informational efficiency are independent, with implications for monetary policy.

Keywords: Incomplete Markets; Allocative Efficiency; Information revealed by prices (search for similar items in EconPapers)
Date: 2000-02-01
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Published in Journal of Economic Theory, 2000, Vol.90,n°2, pp.222-253. ⟨10.1006/jeth.1999.2609⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00463203

DOI: 10.1006/jeth.1999.2609

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