TY - JOUR
T1 - Incomplete Markets, Allocative Efficiency, and the Information Revealed by Prices
AU - Citanna, Alessandro
AU - Villanacci, Antonio
N1 - Funding Information:
1We thank Paolo Siconolfi for helpful discussions, and the anonymous associate editor and referee for their comments. The paper was started when the second author was visiting the University of Geneva, Switzerland. Antonio Villanacci acknowledges the financial support of the ‘‘Human Capital and Mobility’’ fellowship ERBCCHBGCT940558 and a fellowship from CNR, Italy.
PY - 2000/2
Y1 - 2000/2
N2 - We compare rational expectations equilibria with different degrees of information revelation through prices. These equilibria arise in a two-period exchange economy with finitely many states and signals, multiple commodities and incomplete financial markets for nominal assets. We show that there are always equilibria where information is redundant in the sense of being of no value to the uninformed traders. We give conditions under which for a generic set of economies, parametrized by endowments and utilities, there exist open sets of equilibria for which allocative and informational efficiency are independent, with implications for monetary policy. Journal of Economic Literature Classification Numbers: D52, D60, D82, E52.
AB - We compare rational expectations equilibria with different degrees of information revelation through prices. These equilibria arise in a two-period exchange economy with finitely many states and signals, multiple commodities and incomplete financial markets for nominal assets. We show that there are always equilibria where information is redundant in the sense of being of no value to the uninformed traders. We give conditions under which for a generic set of economies, parametrized by endowments and utilities, there exist open sets of equilibria for which allocative and informational efficiency are independent, with implications for monetary policy. Journal of Economic Literature Classification Numbers: D52, D60, D82, E52.
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U2 - 10.1006/jeth.1999.2609
DO - 10.1006/jeth.1999.2609
M3 - Article
AN - SCOPUS:0038381754
SN - 0022-0531
VL - 90
SP - 222
EP - 253
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 2
ER -