Pareto Improving Price Regulation when the Asset Market Is Incomplete

P.J.J. Herings; H.M. Polemarchakis

doi:10.1007/3-540-28161-4_12

Pareto Improving Price Regulation when the Asset Market Is Incomplete

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

Microeconomics & Public Economics

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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.key wordsincomplete asset marketfix-price equilibriapareto improvement.

Original language	English
Title of host publication	Essays in Honor of Birgit Grodal, Studies in Economic Theory
Editors	C Schultz, K Vind
Publisher	Springer Verlag
Pages	225-244
Number of pages	20
DOIs	https://doi.org/10.1007/3-540-28161-4_12
Publication status	Published - 1 Jan 2006

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Pareto Improving Price Regulation when the Asset Market Is Incomplete

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