Blume, Lawrence E. Cogley, Timothy Easley, David A. Sargent, Thomas J. Tsyrennikov, Viktor
Year of Publication:
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 313
We propose a new welfare criterion that allows us to rank alternative financial market structures in the presence of belief heterogeneity. We analyze economies with complete and incomplete financial markets and/or restricted trading possibilities in the form of borrowing limits or transaction costs. We describe circumstances under which various restrictions on financial markets are desirable according to our welfare criterion.