Risk-sharing and retrading in incomplete markets
Rahi, R.
& Gottardi, P.
(2012).
Risk-sharing and retrading in incomplete markets.
& Gottardi, P.
(2012).
Risk-sharing and retrading in incomplete markets.
At a competitive equilibrium of an incomplete-markets economy agents’ marginal valuations for the tradable assets are equalized ex-ante. We characterize the finest partition of the state space conditional on which this equality holds for any economy. This leads naturally to a necessary and sufficient condition on information that would lead to retrade, if such information were to become publicly available after the initial round of trade.