Radner Equilibrium

AAA

DEFINITION of 'Radner Equilibrium'

A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then even in the face of uncertainty about the economic environment, an optimal allocation of resources based on competitive equilibrium can be achieved. Radner Equilibrium was introduced by American economist Roy Radner in 1968, and explores the condition of competitive equilibrium under uncertainty.

INVESTOPEDIA EXPLAINS 'Radner Equilibrium'

The theory also states that in such a world there would be no role for money and liquidity. And the introduction of information (such as the introduction of spot markets and futures markets) about the behavior of other decision makers introduces externalities among the sets of actions available to them. This generates a demand for liquidity, which also arises from computational limitations. The theory notes that uncertainty about the environment greatly complicates a decision problem, thereby indirectly contributing to the demand for liquidity.

RELATED TERMS
  1. Risk Analysis

    The study of the underlying uncertainty of a given course of ...
  2. Equilibrium

    The state in which market supply and demand balance each other ...
  3. Neoclassical Economics

    An approach to economics that relates supply and demand to an ...
  4. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it ...
  5. Welfare Economics

    A branch of economics that focuses on the optimal allocation ...
  6. Policyholder Surplus

    The assets of a mutual insurance company minus its liabilities. ...
Related Articles
  1. A Practical Look At Microeconomics
    Economics

    A Practical Look At Microeconomics

  2. What's the difference between macroeconomics ...
    Investing

    What's the difference between macroeconomics ...

  3. Using Normal Distribution Formula To ...
    Investing Basics

    Using Normal Distribution Formula To ...

  4. The Government And Risk: A Love-Hate ...
    Insurance

    The Government And Risk: A Love-Hate ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center