Pareto Improving Price Regulation when the Asset Market Is Incomplete

P.J.J. Herings*, H.M. Polemarchakis

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Incomplete asset markets cause competitive equilibria to be constrained suboptimal and provides scope for pareto improving interventions. In this paper, we examine how intervention in prices in asset or spot commodity markets serves this purpose. We show that, if fix-price equilibria behave sufficiently regularly near walrasian equilibria, pareto improving price regulation is generically possible. An advantage of price regulation, contrasted with interventions in individuals’ asset portfolios, is that it operates anonymously, on market variables.
Original languageEnglish
Pages (from-to)135-154
JournalEconomic Theory
Volume25
Early online date2004
DOIs
Publication statusPublished - 2005

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