We propose an objective for the firm in a model of production economies extending over time under uncertainty and with incomplete markets. We derive the objective of the firm from the assumption of initial-shareholders efficiency. Each shareholder is assumed to communicate to the firm her...

In an economy with a non-atomic measure space of assets and exchangeable risks, the Arbitrage Pricing Theory (APT) holds exactly; and factors are structurally specified, which allows for an economic interpretation.

The coordinating role of a redundant security is its role in markets with transaction costs to coordinate different consumers’ security demands so as to clear all security markets and, simultaneously, attain a given commodity allocation. The purpose of this paper is to prove that, under some...

In an economy with a non-atomic measure space of assets and exchangeable risks, the Arbitrage pricing Theory (APT) holds exactly; and factors are structurally specified, which allows for an economic interpretation.

The present note highlights the seminal contributions of Diamond, Drèze and Radner towards the integration of financial markets into general equilibrium modeling.

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...

In a incomplete asset market, firms compute the value of production plans by approximating them with the payoffs of portfolios of marketed assets; equivalently, by projecting their payoffs on the span of the payoffs of marketed assets; equivalently, they apply the capital asset pricing model.

Profit maximization is not a well defined objective when markets are incomplete. Several criteria of investment choice have therefore been put forward in the literature, some of which crucially hinge upon aggregation of shareholders' preferences, as is the case with the criteria proposed by...

The competitive equilibrium correspondence, which associates equilibrium prices of commodities and assets with allocations of endowments, identifies the preferences and beliefs of individals also under uncertainty; this is the case even if the asset market is incomplete.

In this paper we illustrate the possible normative relevance of the links between human capital and financial assets via an example related to growth. When the financial structure is complete, growth is indeterminate because individual allocations between human capital and a tradable asset are...