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On the Allocative Efficiency of Competitive Prices in Economies with Incomplete Markets

Tarun Sabarwal ()

GE, Growth, Math methods from University Library of Munich, Germany

Abstract: A new measure of constrained efficiency for application in economies with incomplete markets is presented. This measure --- termed Allais- Malinvaud efficiency --- can be viewed as adjusting for market incompleteness not fully captured in previous work. It is shown that equilibrium allocations in Radner-GEI economies are always Allais- Malinvaud efficient. In particular, a re-distribution of assets in equilibrium cannot induce a relative price change that leads to an Allais-Malinvaud improvement. Moreover, this result extends to Radner- GEI economies in which consumer liability is limited by bankruptcy.

Keywords: Allocative Efficieny; Incomplete Markets; Allais-Malinvaud Efficiency (search for similar items in EconPapers)
JEL-codes: D52 D61 (search for similar items in EconPapers)
Date: 2004-10-05
Note: Type of Document - pdf; pages: 38
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