Abstract: This paper examines the welfare of consumers in an incomplete markets economy with extrinsic uncertainty. It is shown that the utility of one consumer may be minimized at the Walrasian allocation relative to all other equilibrium allocations for a given security structure. Thus, this consumer will have no incentive to trade the new securities if they complete the insurance markets.
Publication Year: 2004
Publication Date: 2004-01-01
Language: en
Type: article
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