We develop the theory of demand for commodities and assets facing incompletely insurable uncertainty. First, a Slutsky matrix decomposes into substitution and income effects the derivative of demand with respect to prices and yield structure. Next, we identify the Slutsky matrix's properties. The Slutsky matrix can be perturbed arbitrarily, subject only to preserving these properties, by perturbing the underlying utility's Hessian, while fixing point demand and marginal utility. The key result identifies these Slutsky perturbations. For arguing genericity, it is an alternative to Citanna, Kajii and Villanacci's (1998) first-order conditions approach. The latter results extend to incomplete markets Geanakoplos and Polemarchakis (1980), who introduced Slutsky perturbations.

No abstract

Focusing on tax policy with incomplete asset markets, we create a framework for proving the existence of Pareto improving taxes, for computing them, and for bounding the improvement. The protagonist is the price adjustment following an intervention. If the price adjustment is sufficiently sensitive to risk aversions, then generically in economies equilibria admit Pareto improving tax rates-if tax parameters and incompleteness exceed household heterogeneity, and multiple commodities exist. We explain how to verify this sensitivity test with standard demand theory. We then illustrate that different policies generically admit Pareto improving taxes, by showing they all pass this sensitivity test. These include (a) taxes on asset purchases, (b) lump-sum taxes on present income plus one flat tax on asset purchases, (c) asset measurable taxes on capital gains, (d) excise taxes on current commodities.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may May 2008Abstract A classic characterization of competitive equilibria views them as feasible allocations maximizing a weighted sum of utilities. It has been applied to establish fundamental properties of the equilibrium notion, such as existence, determinacy, and computability. However, it fails for economies with missing …nancial markets.We give such a characterization for economies with missing …nancial markets, by an amended social welfare function. Its parameters capture both the relative importance of households'welfare-the classic weights-as well as the disagreements among them as to the value of the missing markets.As a by-product, we identify the dimension of the set of interior equilibrium allocations.

Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.