A Simple Model of Privately Profitable but Socially Useless Speculation View Full Text


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Article Info

DATE

2000-03

AUTHORS

Murray C. Kemp, Hans-Werner Sinn

ABSTRACT

The paper presents a general equilibrium model of a pure exchange economy with stochastic endowments, in which speculation in the forward market is profitable and stabilizes prices but is useless from a welfare point of view. Reconciling the Siegel paradox with the theory of incomplete markets, we show that banning speculation by closing the forward market may increase social welfare. We also show that the addition of a market might reduce the gains from international trade for all participating countries. More... »

PAGES

84-94

References to SciGraph publications

  • 1989-10. Expected utility and the Siegel paradox in JOURNAL OF ECONOMICS
  • 1990-03-01. Incomplete Markets and Incentives to Set Up an Options Exchange in THE GENEVA RISK AND INSURANCE REVIEW
  • Identifiers

    URI

    http://scigraph.springernature.com/pub.10.1111/1468-5876.00140

    DOI

    http://dx.doi.org/10.1111/1468-5876.00140

    DIMENSIONS

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