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- Title
Pareto improving price regulation when the asset market is incomplete.
- Authors
Herings, P. Jean-Jacques; Polemarchakis, Herakles
- 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.
- Subjects
PRICE regulation; ECONOMIC equilibrium; PARETO optimum; FIXED prices; PORTFOLIO management (Investments)
- Publication
Economic Theory, 2005, Vol 25, Issue 1, p135
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s00199-003-0431-y