A reduction in the output of productive assets (trees) in some contingencies may expand the range of risks spanned by the payoffs of assets and allow for better risk sharing; which may compensate for the loss of output and support a Pareto superior allocation. Surprisingly, if short sales of assets are not allowed, improved risk sharing that results from the destruction of output does not suffice to support a Pareto superior allocation.
|Number of pages||4|
|Journal||Journal of Mathematical Economics|
|Early online date||29 Sept 2016|
|Publication status||Published - 1 Dec 2016|
- short sales
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Person: Research & Teaching