  We consider thin incomplete financial markets, where traders with
heterogeneous preferences and risk exposures have motive to behave
strategically regarding the demand schedules they submit, thereby impacting
prices and allocations. We argue that traders relatively more exposed to market
risk tend to submit more elastic demand functions. Noncompetitive equilibrium
prices and allocations result as an outcome of a game among traders. General
sufficient conditions for existence and uniqueness of such equilibrium are
provided, with an extensive analysis of two-trader transactions. Even though
strategic behaviour causes inefficient social allocations, traders with
sufficiently high risk tolerance and/or large initial exposure to market risk
obtain more utility gain in the noncompetitive equilibrium, when compared to
the competitive one.
