| Author: | Arrow, K. J. Hahn, F. |
| Title: | Notes on sequence economies, transaction costs, and uncertainty |
| Journal: | Journal of Economic Theory
1999 : JUN ,VOL. 86:2, p. 203-218 |
| Index terms: | ECONOMICS UNCERTAINTY TRANSACTION COSTS |
| Language: | eng |
| Abstract: | This paper examines some conditions for essentiality. If there are transaction costs, then even if all states of nature are spanned by the securities, the economy is generically essential: In the absence of transaction costs, the study shows by examples that spanning is neither necessary nor sufficient for inessentiality, the former because some state distinctions may be irrelevant, the latter because of possible multiple spot equilibria for a given state. The study speculates on the possibility that price-contingent securities might complete the markets, and on the idea of endogenous uncertainty. |
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