Pareto improving price regulation when the asset market is incomplete

P.J.J. Herings; H Polemarchakis

doi:10.1007/s00199-003-0431-y

Pareto improving price regulation when the asset market is incomplete

P.J.J. Herings^*, H Polemarchakis

^*Corresponding author for this work

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Abstract

Incomplete asset markets cause competitive equilibria to be constrained suboptimal and provides scope for Pareto improving interventions. In this paper, we examine how intervention in prices in asset or spot commodity markets serves this purpose. We show that, if fix-price equilibria behave sufficiently regularly near Walrasian equilibria, Pareto improving price regulation is generically possible. An advantage of price regulation, contrasted with interventions in individuals' asset portfolios, is that it operates anonymously, on market variables.

Original language	English
Pages (from-to)	135-154
Number of pages	20
Journal	Economic Theory
Volume	25
Issue number	1
DOIs	https://doi.org/10.1007/s00199-003-0431-y
Publication status	Published - Jan 2005
Externally published	Yes
Event	Symposium on Topics in Mathematical Economics held in Honor of Birgit Grodal - Copenhagen, Denmark Duration: 1 Sept 2002 → …

Keywords

incomplete market
fix-price equilibria
Pareto improvement
FINANCIAL INNOVATION
EQUILIBRIUM
OPTIMALITY

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KW - FINANCIAL INNOVATION

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KW - OPTIMALITY

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ER -

Pareto improving price regulation when the asset market is incomplete

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Keywords

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