The paper analyzes the process of market selection of investment strategies in an incomplete market of short-lived assets. In the model understudy, asset payoffs depend on exogenous random factors. Market participants use dynamic investment strategies taking account of available information...

In this paper we analyze the welfare properties of the set of Drèze equilibria for economies with incomplete markets and firms. The well known fact that a Drèze equilibrium need not be constrained Pareto optimal is often attributed to a lack of coordination between firms. We show that there...