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Browsing by Author "Townsend, Robert M."

Now showing 1 - 4 of 4
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    General Competitive Analysis in an Economy with Private Information
    (Center for Economic Research, Department of Economics, University of Minnesota, 1981-04) Townsend, Robert M.; Prescott, Edward C.
    General competitive analysis is extended to cover a dynamic, pure-exchange economy with privately observed shocks to preferences. In the linear, infinite-dimensional space containing lotteries we establish the existence of optima, the existence of competitive equilibria, that every competitive equilibrium is an optimum, and, with some revealing qualifications, that every optimum can be supported as a competitive equilibrium. An example illustrates that rationing and securities with contrived risk have an equilibrium interpretation.
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    Incomplete Forward Markets in a Pure Exchange Economy with Stochastic Endowments
    (Center for Economic Research, Department of Economics, University of Minnesota, 1974-11) Townsend, Robert M.
    Jacques Dreze has stressed the need for research into the functions and shortcomings of existing institutions and for the application of standard welfare economics based on Pareto optimality to limited exchange opportunities for the allocation of risk bearing. The objective of the paper is to examine the workings and welfare implications of actual forward markets and to place those markets in the context of complete contingent commodity markets. Second best government policies in the absence of complete markets are explored.
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    Optima and Competitive Equilibria with Adverse Selection and Moral Hazard
    (Center for Economic Research, Department of Economics, University of Minnesota, 1981-06) Prescott, Edward C.; Townsend, Robert M.
    This paper explores the extent to which standard, general equilibrium analysis of optima and competitive equilibria in the linear space containing lotteries can be applied to environments with moral· hazard and adverse selection problems. Techniques for characterizing optima as solutions to linear programs are found to be useful and nice and appear to be broadly applicable. But existence and optimality of competitive equilibria seem to require that agents with characteristics which are distinct and privately observed at the time -of initial trading enter the economy-wide resource constraints in a homogeneous way; subsequent heterogeneity is not critical. The homogeneity condition is satisfied for a dynamic private-information securities economy and a moral hazard insurance economy, but not for the well-known and interesting signaling and adverse-selection insurance economies. For the latter, heterogeneity introduces an externality of some kind.
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    Price Fixing Schemes and Optimal Buffer Stock Policies
    (Center for Economic Research, Department of Economics, University of Minnesota, 1974-11) Townsend, Robert M.
    This paper examines the feasibility of price fixing and the welfare implications of government buffer stock programs in a stochastic general equilibrium framework. It is found that regardless of the price set by the government and regardless of the initial level of buffer stocks, a price fixing scheme will eventually fail with probability one. In a competitive equilibrium with storage by individuals, prices will be random even if the nature of the stochastic processes are known to everyone. In the absence of contingent contracts such an equilibrium can be second best.