Incomplete Markets, Allocative Efficiency, and the Information Revealed by Prices

Alessandro Citanna, Antonio Villanacci

Research output: Contribution to journalArticle

Abstract

We compare rational expectations equilibria with different degrees of information revelation through prices. These equilibria arise in a two-period exchange economy with finitely many states and signals, multiple commodities and incomplete financial markets for nominal assets. We show that there are always equilibria where information is redundant in the sense of being of no value to the uninformed traders. We give conditions under which for a generic set of economies, parametrized by endowments and utilities, there exist open sets of equilibria for which allocative and informational efficiency are independent, with implications for monetary policy. Journal of Economic Literature Classification Numbers: D52, D60, D82, E52.

Original languageEnglish (US)
Pages (from-to)222-253
Number of pages32
JournalJournal of Economic Theory
Volume90
Issue number2
DOIs
StatePublished - Feb 1 2000

Fingerprint

Incomplete markets
Allocative efficiency
Exchange economy
Commodities
Traders
Rational expectations equilibrium
Economics
Information revelation
Monetary policy
Endowments
Assets
Informational efficiency
Incomplete financial markets

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Incomplete Markets, Allocative Efficiency, and the Information Revealed by Prices. / Citanna, Alessandro; Villanacci, Antonio.

In: Journal of Economic Theory, Vol. 90, No. 2, 01.02.2000, p. 222-253.

Research output: Contribution to journalArticle

@article{0dcbe3fde2dc4ac88a5d66c7644306f2,
title = "Incomplete Markets, Allocative Efficiency, and the Information Revealed by Prices",
abstract = "We compare rational expectations equilibria with different degrees of information revelation through prices. These equilibria arise in a two-period exchange economy with finitely many states and signals, multiple commodities and incomplete financial markets for nominal assets. We show that there are always equilibria where information is redundant in the sense of being of no value to the uninformed traders. We give conditions under which for a generic set of economies, parametrized by endowments and utilities, there exist open sets of equilibria for which allocative and informational efficiency are independent, with implications for monetary policy. Journal of Economic Literature Classification Numbers: D52, D60, D82, E52.",
author = "Alessandro Citanna and Antonio Villanacci",
year = "2000",
month = "2",
day = "1",
doi = "10.1006/jeth.1999.2609",
language = "English (US)",
volume = "90",
pages = "222--253",
journal = "Journal of Economic Theory",
issn = "0022-0531",
publisher = "Academic Press Inc.",
number = "2",

}

TY - JOUR

T1 - Incomplete Markets, Allocative Efficiency, and the Information Revealed by Prices

AU - Citanna, Alessandro

AU - Villanacci, Antonio

PY - 2000/2/1

Y1 - 2000/2/1

N2 - We compare rational expectations equilibria with different degrees of information revelation through prices. These equilibria arise in a two-period exchange economy with finitely many states and signals, multiple commodities and incomplete financial markets for nominal assets. We show that there are always equilibria where information is redundant in the sense of being of no value to the uninformed traders. We give conditions under which for a generic set of economies, parametrized by endowments and utilities, there exist open sets of equilibria for which allocative and informational efficiency are independent, with implications for monetary policy. Journal of Economic Literature Classification Numbers: D52, D60, D82, E52.

AB - We compare rational expectations equilibria with different degrees of information revelation through prices. These equilibria arise in a two-period exchange economy with finitely many states and signals, multiple commodities and incomplete financial markets for nominal assets. We show that there are always equilibria where information is redundant in the sense of being of no value to the uninformed traders. We give conditions under which for a generic set of economies, parametrized by endowments and utilities, there exist open sets of equilibria for which allocative and informational efficiency are independent, with implications for monetary policy. Journal of Economic Literature Classification Numbers: D52, D60, D82, E52.

UR - http://www.scopus.com/inward/record.url?scp=0038381754&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0038381754&partnerID=8YFLogxK

U2 - 10.1006/jeth.1999.2609

DO - 10.1006/jeth.1999.2609

M3 - Article

AN - SCOPUS:0038381754

VL - 90

SP - 222

EP - 253

JO - Journal of Economic Theory

JF - Journal of Economic Theory

SN - 0022-0531

IS - 2

ER -