Endogenous Financing of Production in General Equilibrium with Incomplete Markets

Pascal Christian Stiefenhofer

Discussion Papers from Department of Economics, University of York

Abstract: This paper considers the financing of production in a two period general equilibrium model with incomplete markets. This requires a model where the efficient boundary of the production set available to a producer in period two in every state of the world is not independent of the financial activities of the firm in period one. The novelty of the paper is a definition of a class of long run profit maximization objective functions of the firm which is independent of any average utility of the owners of the firm. This generalizes the traditional objective of profit maximization of the Arrow-Debreu model to the case of incomplete markets. The paper shows that equilibrium exists for convex smooth and convex piecewise linear endogenized production sets.

Keywords: Existence; Incomplete Markets; Pro t Maximization; Production. (search for similar items in EconPapers)
JEL-codes: D52 D53 D62 (search for similar items in EconPapers)
Date: 2010-07
New Economics Papers: this item is included in nep-bec and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:10/20

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