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dc.contributor.authorWILLEMS, Bert
dc.contributor.authorMORBEE, Joris
dc.date.accessioned2012-07-12T16:20:45Z
dc.date.available2012-07-12T16:20:45Z
dc.date.issued2012
dc.identifier.issn1028-3625
dc.identifier.urihttp://hdl.handle.net/1814/22778
dc.description.abstractIn this paper we show that free entry decisions may be socially ineffcient, even in a perfectly competitive homogeneous goods market with non-lumpy investments. In our model, inefficient entry decisions are the result of risk-aversion of incumbent producers and consumers, combined with incomplete financial markets which limit risk-sharing between market actors. Investments in productive assets affect the distribution of equilibrium prices and quantities, and create risk spillovers. From a societal perspective, entrants underinvest in technologies that would reduce systemic sector risk, and may overinvest in risk-increasing technologies. The inefficiency is shown to disappear when a complete financial market of tradable risk-sharing instruments is available, although the introduction of any individual tradable instrument may actually decrease effciency.en
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.relation.ispartofseriesEUI RSCASen
dc.relation.ispartofseries2012/35en
dc.relation.ispartofseriesLoyola de Palacio Programme on Energy Policyen
dc.rightsinfo:eu-repo/semantics/openAccess
dc.titleRisk Spillovers and Hedging: Why do firms invest too much in systemic risk?en
dc.typeWorking Paperen
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