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The relevance of extrinsic uncertainty

Author

Listed:
  • POLEMARCHAKIS, Heracles

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

  • VENTURA, Luigi

    (Department of Economics, Università G. d'Annunzio and CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

Abstract

Extrinsic uncertainty is effective at a competitive equilibrium. This is generic if spot markets are inoperative: the only objects of exchange are assets for the contingent delivery of commodities; and the asset market is incomplete. The structure of payoffs of assets may allow for non-trivial allocations invariant with respect to the extrinsic uncertainty, and the economy with a complete asset market may well have a globally unique competitive eqUilibrium. Inoperative spot markets have a natural interpretation in economies with multiple periods; assets cannot be retraded.

Suggested Citation

  • POLEMARCHAKIS, Heracles & VENTURA, Luigi, 1995. "The relevance of extrinsic uncertainty," LIDAM Discussion Papers CORE 1995081, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1995081
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1995.html
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    Keywords

    extrinsic uncertainty; competitive equilibrium;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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