Economic Theory

, Volume 54, Issue 2, pp 287–304 | Cite as

Risk sharing and retrading in incomplete markets

Research Article

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 

References

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Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  1. 1.Department of EconomicsEuropean University InstituteFlorenceItaly
  2. 2.Dipartimento di Scienze EconomicheUniversità di VeneziaVeneziaItaly
  3. 3.Department of Finance and Financial Markets GroupLondon School of EconomicsLondonUK

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