Abstract:When markets are incomplete, the competitive equilibria considered so far are not constrained Pareto-efficient, production efficiency breaks down and shareholders no longer agree on the objective function of the firm.We first show by way of an example that these inefficiencies can result from the double role of firms in incomplete markets: providing high market value and providing good hedging opportunities (spanning role).To disentangle these two conflicting roles of the firm's decision, we then suggest to le… Show more
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.