Risk-Sharing and Retrading in Incomplete Markets
Title: Risk-Sharing and Retrading in Incomplete Markets
Series/Number: EUI ECO; 2012/03
At a competitive equilibrium of an incomplete-markets economy agents’ marginal valuations for the tradable assets are equalized ex-ante. We characterize the finest partition of the state space conditional on which this equality holds for any economy. This leads naturally to a necessary and sufficient condition on information that would lead to retrade, if such information were to become publicly available after the initial round of trade.
Subject: Competitive Equilibrium; Incomplete Markets; Information; Re-trading; D52; D80
Type of Access: openAccess