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The Relevance of Extrinsic Uncertainty

Author

Listed:
  • Heracles M. Polemarchakis

    (Department of Economics - Brown University, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain)

  • Luigi Ventura

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, Dipartimento di Scienze Economiche - UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome])

Abstract

When the asset market is incomplete extrinsic risk is effective at competitive equilibrium allocations; this is the case whether commodities are exchanged indirectly, through the exchange of assets, or whether assets serve to transfer revenue and commodities are exchanged in spot markets. Individuals bear extrinsic risk for the benefit of exchanging commodities or transferring revenue in the absence of complete markets for the allocation of intrinsic risk.

Suggested Citation

  • Heracles M. Polemarchakis & Luigi Ventura, 2000. "The Relevance of Extrinsic Uncertainty," Working Papers hal-00598239, HAL.
    • Handle: RePEc:hal:wpaper:hal-00598239
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    Keywords

    extrinsic risk; competitive equilibrium.; competitive equilibrium;
    All these keywords.

    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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