Are Incomplete Markets Able to Achieve Minimal Efficiency?

Egbert Dierker, Hildegard Dierker and Birgit Grodal
Additional contact information
Hildegard Dierker: University of Vienna

No 03-09, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: We consider economies with incomplete markets, one good per state, two periods, t = 0; 1, private ownership of initial endowments, a single firm, and no assets other than shares in this firm. In Dierker, Dierker, Grodal (2002), we give an example of such an economy in which all market equilibria are constrained ineffcient. In this paper, we weaken the concept of constrained effciency by taking away the planner’s right to determine consumers’ investments. An allocation is called minimally constrained efficient if a planner, who can only determine the production plan and the distribution of consumption at t = 0, cannot find a Pareto improvement. We present an example with arbitrarily small income effects in which no market equilibrium is minimally constrained effcient.

Keywords: incomplete markets with production; constrained efficiency; Drèze equilibria (search for similar items in EconPapers)
JEL-codes: D2 D52 D61 G1 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2002-11
New Economics Papers: this item is included in nep-cfn
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.econ.ku.dk/english/research/publications/wp/2003/0309.pdf/ (application/pdf)

Related works:
Chapter: Are Incomplete Markets Able to Achieve Minimal Efficiency? (2006)
Journal Article: Are incomplete markets able to achieve minimal efficiency? (2005)
Working Paper: Are Incomplete Markets Able to Achieve Minimal Efficiency? (2002)
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