The BP Deepwater Horizon oil spill of 2010 has focused considerable attention on the potential liability and the operating conduct of big oil companies. This paper shows that, limiting the ability of a company to insure and diversify its risks, creates incentives to internalize the welfare effects of catastrophic events, leading to a welfare improvement. We model an economy with complete financial markets where one agent’s actions impose an externality on other agents by altering the probability distribution of their risks. Then, a Pareto improved allocation can be reached via an asset reallocation, essentially restricting this agent’s choice of portfolio of assets. Hence, in the presence of externalities, disturbing the functioning of perfect financial markets can be socially beneficial.
ACERCA DEL EXPOSITOR
Andrés Carvajal, es profesor del Departamento de Economía de la Universidad de California - David. es un teórico de la economía, con énfasis en la microeconomía, economía financiera y la economía matemática . Él es el co-editor, para la teoría económica, de la
Canadian Economic Journal. PhD. en Economía y Máster en Economía en Brown University. Ha sido profesor asociado en University of Western Ontario y en University of Warwick. Director de Center for Research in Economic Theory and Applications, University of Warwick e Investigador del Banco de la República, Colombia.