Les Cahiers de Recherche - HEC Paris
Heracles M. POLEMARCHAKIS and Luigi VENTURA
The relevance of extrinsic uncertainty
Abstract: Extrinsic uncertainty is effective at a competitive
equilibrium. This is generically the case if commodities are exchanged
indirectly, through the exchange of assets, spot markets are inoperative,
while the asset market is incomplete.
The structure of payoffs of
assets may allow for non - trivial allocations invariant with respect to
the extrinsic uncertainty, and the economy with a complete asset market may
well have a globally unique competitive equilibrium.
equilibrium allocations are constrained pareto optimal : effective
extrinsic uncertainty is not disadvantageous, given the restricted set of
Inoperative spot markets have a natural
interpretation in economies with multiple periods: assets cannot be
Keywords: Extrinsic uncertainty; competitive equilibrium; (follow links to similar papers)
JEL-Codes: D50; D52; D60; D84; (follow links to similar papers)
12 pages, January 1, 2000
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