We show that at any equilibrium of almost every single-good incomplete markets economy, it is possible to find an asset which when introduced makes every agent better-off. Diamond (1967) has shown, however, that such economies are constrained suboptimal, so it is of course impossible to find a...

This paper studies the conditions for aggregation, portfolio separation and effective completeness of competitive allocations in general equilibrium models with incomplete markets where agents have general preference and endowment distributions. We show that these properties are distinct....

We prove that locally, Walras' law and homogeneity characterize the structure of market excess demand functions when financial markets are incomplete and assets' returns are nominal. The method of proof is substantially different from all existing arguments as the properties of individual demand...

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...

In this paper we investigate the consequences of the firms' financial decisions in the framework of a perfectly competitive general equilibrium model with incomplete markets. When markets are complete or there are no derivative securities (such as options, forwards or futures) written on the...