A Case for Incomplete Markets

Blume, Lawrence and Cogley, Timothy and Easley, David and Sargent, Thomas and Tsyrennikov, Viktor (June 2015) A Case for Incomplete Markets. IHS Economics Series 313, 45 p.

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Abstract or Table of Contents

We propose a new welfare criterion that allows us to rank alternative financial market structures in the presence of belief heterogeneity. We analyze economies with complete and incomplete financial markets and/or restricted trading possibilities in the form of borrowing limits or transaction costs. We describe circumstances under which various restrictions on financial markets are desirable according to our welfare criterion.

Item Type: IHS Series
Keywords: social welfare, heterogeneous beliefs, spurious unanimity, speculation, pessimism, incomplete markets, financial regulation
Status: Published
Date Deposited: 12 Jun 2015 08:23
Last Modified: 26 Jul 2017 08:39
URI: http://irihs.ihs.ac.at/id/eprint/3548

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