Generic Inefficiency of Stock Market Equilibrium When Markets Are Incomplete

@inproceedings{Geanakoplos1990GenericIO,
  title={Generic Inefficiency of Stock Market Equilibrium When Markets Are Incomplete},
  author={John Geanakoplos and Michael Magill and M. QUINZII and J. DRfiZE},
  year={1990}
}
If the asset market is incomplete, and if there are two or more consumption goods in each state of nature, then for fixed consumer preferences (of at least two agents), and fixed (non-trivial) technologies for the firm(s), and for a generic assignment of initial endowments, competitive equilibrium investment decisions are constrained inefficient. An outside agency can, simply by redirecting the investment decisions of firms and by lump sum transfers to individuals before the state of nature is… CONTINUE READING
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