Efficient Allocations with Hidden Income and Hidden Storage

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Creator Series Issue number
  • 238
Date Created
  • 1999-06
Abstract
  • We consider an environment in which individuals receive income shocks that are unobservable to others and can privately store resources. We provide a simple characterization of the efficient allocation in cases in which the rate of return on storage is sufficiently high or, alternatively, in which the worst possible outcome is sufficiently dire. We show that, unlike in environments without unobservable storage, the symmetric efficient allocation is decentralizable through a competitive asset market in which individuals trade risk-free bonds among themselves.

Related information Corporate Author
  • Federal Reserve Bank of Minneapolis. Research Department
Publisher
  • Federal Reserve Bank of Minneapolis
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