Research Article

Economic Theory

, Volume 54, Issue 2, pp 287-304

First online:

Risk sharing and retrading in incomplete markets

  • Piero GottardiAffiliated withDepartment of Economics, European University InstituteDipartimento di Scienze Economiche, Università di Venezia
  • , Rohit RahiAffiliated withDepartment of Finance and Financial Markets Group, London School of Economics Email author 

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access


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.


Competitive equilibrium Incomplete markets Information Retrading

JEL Classification

D52 D80