A social welfare function characterizing competitive equilibria of incomplete financial markets

Mario Tirelli () and Sergio Turner

No 93, Departmental Working Papers of Economics - University 'Roma Tre' from Department of Economics - University Roma Tre

Abstract: A classic characterization of competitive equilibria views them as feasible allocations maximizing a weighted sum of utilities. It has been applied to establish fundamental properties of the equilibrium notion, such as existence, determinacy, and computability. However, it fails for economies with missing financial markets. We give such a characterization for economies with missing financial markets, by an amended social welfare function. Its parameters capture both the relative importance of households’ welfare–the classic weights–as well as the disagreements among them as to the value of the missing markets. As a by-product, we identify the dimension of the set of interior equilibrium allocations.

Keywords: incomplete markets; social welfare function; manifold (search for similar items in EconPapers)
JEL-codes: D52 D61 (search for similar items in EconPapers)
Pages: 15
Date: 2008-05
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Journal Article: A social welfare function characterizing competitive equilibria of incomplete financial markets (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:rtr:wpaper:0093

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