Walrasian Non-tatonnement with Incomplete and Imperfectly Competitive Markets

Gaël Giraud

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Abstract: Static competitive equilibria in economies with incomplete markets are generically constrained suboptimal. Allocations induced by strategic equilibria of imperfectly competitive markets are also generically inefficient. In both cases, there is scope for Pareto-improving amendments. In an extension of the limit-price process introduced in Giraud [20] to incomplete markets (with infinitely many uncertain states) populated by finitely many players, we show that these two inefficiency problems can be partially overcome when rephrased in a non-tatonnement process. Traders are myopic and trade financial securities in continuous time by sending limit-orders so as to select a portfolio that maximizes the first-order approximation of their expected indirect utility. We show that financial trade curves exist and converge to some second-best efficient restpoint unless some miscoordination stops the dynamics at some inefficient, but locally unstable point.

Keywords: Incomplet markets; imperfect competition; second-best efficiency; non-tatonnement; concurrence imparfaite; efficience de second rang; Marchés incomplets; non-tâtonnement (search for similar items in EconPapers)
Date: 2007-04
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00155717
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Published in 2007

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Working Paper: Walrasian Non-tatonnement with Incomplete and Imperfectly Competitive Markets (2007)
Working Paper: Walrasian non-tatonnement with incomplete and imperfectly competitive markets (2007)
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