Answers are grounded in this paper and cite their sources.
If the asset market is incomplete, and if there are two or more consumption goods in each state of nature, then for fixed consumer preferences (of at least two agents), and fixed (non-trivial) technologies for the firm(s), and for a generic assignment of initial endowments, competitive equilibrium investment decisions are constrained inefficient. An outside agency can, simply by redirecting the investment decisions of firms and by lump sum transfers to individuals before the state of nature is realized, make all consumers better off.
No takes yet. Share an insight, caveat, or question.
Geanakoplos et al. (1990) studied this question.
Synapse has enriched 10 related papers. Consider them for comparative context: