Economic Theory

, Volume 54, Issue 2, pp 287–304

Risk sharing and retrading in incomplete markets

Authors

  • Piero Gottardi
    • Department of EconomicsEuropean University Institute
    • Dipartimento di Scienze EconomicheUniversità di Venezia
    • Department of Finance and Financial Markets GroupLondon School of Economics
Research Article

DOI: 10.1007/s00199-012-0717-z

Cite this article as:
Gottardi, P. & Rahi, R. Econ Theory (2013) 54: 287. doi:10.1007/s00199-012-0717-z

Abstract

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 induce agents to retrade, if such information was to become publicly available after the initial round of trade.

Keywords

Competitive equilibrium Incomplete markets Information Retrading

JEL Classification

D52 D80

Copyright information

© Springer-Verlag 2012