Uncertainty and insurance in strategic market games

For perfectly competitive economies under uncertainty, there is a well-know n equivalence between a formulation with contingent goods and one with stat e-specific securities followed by spot markets for goods. In this paper, I examine whether this equivalence carries over to a particular form of imper fect competition. Specifically, I look at three Shapley-Shubik strategic ma rket games: one with contingent commodities, one with Arrow securities trad ed under imperfect competition and one with Arrow securities traded under p erfect competition. First I compare the feasibility constraints of these th ree games. Then I compare their equilibrium sets. As in Peck and Shell (198 9), the only common equilibria between the first and the second game are th ose which involve no transfer of income across states. However, if the secu rities markets are competitive, then the set of equilibria of the contingen t commodities game and the securities game coincide.