In this paper, we show that even if a redundant security does not have the cost-saving role in markets with transaction costs, it may still be relevant to risk-sharing at equilibrium. We call this the coordinating role of the redundant security. We prove that at least five securities and three...

We study efficient allocations of contingent commodities in economies in which security markets are incomplete and the payoff structures of securities are somehow endogenously determined. We present a notion of efficiency in this setup, which takes the payoff structures as endogenous variables,...

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...