Abstract
Markets are complete when every agent is able to exchange every good either directly or indirectly with every other agent. When markets are not complete, two fundamental properties of a competitive equilibrium with complete markets may no longer be satisfied. First, stockholders may not agree on the optimal production plan for a firm. Secondly, even in a model of pure exchange, a competitive allocation may not be Pareto optimal even when we restrict attention to allocations which are ‘consistent’ with the market structure. It is with the failure of this optimality property that this essay will be concerned.
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© 1989 Palgrave Macmillan, a division of Macmillan Publishers Limited
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Wilson, C. (1989). Incomplete Markets. In: Eatwell, J., Milgate, M., Newman, P. (eds) Allocation, Information and Markets. The New Palgrave. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-20215-7_18
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DOI: https://doi.org/10.1007/978-1-349-20215-7_18
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-0-333-49539-1
Online ISBN: 978-1-349-20215-7
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