A Model of General Equilibrium with Unforeseen Contingencies

Salvatore Modica (), Aldo Rustichini and Jean-Marc Tallon

No 1995073, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We present a consistent pure-exchange general equilibrium model where agents may not foreseen all possible future contingencies. Even with nominal assets and complete asset markets, in this context an equilibrium may not exist without appropriate assumptions. An intrinsic feature of the model is bankruptcy, which agents may involuntarily experience in unforeseen states.

Date: 1995-12-01
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