A new measure of constrained efficiency for application in economies with incomplete markets is presented. This measure --- termed Allais- Malinvaud efficiency --- can be viewed as adjusting for market incompleteness not fully captured in previous work. It is shown that equilibrium allocations in Radner-GEI economies are always Allais- Malinvaud efficient. In particular, a re-distribution of assets in equilibrium cannot induce a relative price change that leads to an Allais-Malinvaud improvement. Moreover, this result extends to Radner- GEI economies in which consumer liability is limited by bankruptcy.
Sabarwal, Tarun, (2004), On the Allocative Efficiency of Competitive Prices in Economies with Incomplete Markets, GE, Growth, Math methods, EconWPA, http://EconPapers.repec.org/RePEc:wpa:wuwpge:0410006.
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