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Published in:
2006 | OriginalPaper | Chapter
Pareto Improving Price Regulation when the Asset Market is Incomplete
Authors : P. Jean-Jacques Herings, Herakles Polemarchakis
Published in: Institutions, Equilibria and Efficiency
Publisher: Springer Berlin Heidelberg
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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.