Indeterminacy of competitive equilibrium with risk of default

Gaetano Bloise, Pietro Reichlin and Mario Tirelli ()

No 109, Departmental Working Papers of Economics - University 'Roma Tre' from Department of Economics - University Roma Tre

Abstract: We prove indeterminacy of competitive equilibrium in sequential economies, where limited commitment requires the endogenous determination of solvency constraints preventing debt repudiation (Alvarez and Jermann [3]). In particular, we show that, for any arbitrary value of social welfare in between autarchy and (constrained) optimality, there exists an equilibrium attaining that value. Our method consists in restoring Welfare Theorems for a weak notion of (constrained) optimality. The latter, inspired by Malinvaud [15], corresponds to the absence of Pareto improving feasible redistributions over nite (though inde nite) horizons.

Keywords: imited commitment; solvency constraints; Malinvaud efficiency Welfare Theorems; indeterminacy; Welfare Theorems; indeterminacy; Welfare Theorems indeterminacy; financial fragility; market collapse (search for similar items in EconPapers)
JEL-codes: D50 D52 D61 E44 G13 (search for similar items in EconPapers)
Pages: 23
Date: 2009
New Economics Papers: this item is included in nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://host.uniroma3.it/dipartimenti/economia/pdf/WP109.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: INDETERMINACY OF COMPETITIVE EQUILIBRIUM WITH RISK OF DEFAULT (2009)
Working Paper: Indeterminacy of Competitive Equilibrium with Risk of Default (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rtr:wpaper:0109

Access Statistics for this paper

More papers in Departmental Working Papers of Economics - University 'Roma Tre' from Department of Economics - University Roma Tre Via Silvio d'Amico 77, - 00145 Rome Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Telephone for information ().