Long-run survival in limited stock market participation models with power utilities

Heeyoung Kwon and Kasper Larsen

Papers from arXiv.org

Abstract: We extend the limited participation model in Basak and Cuoco (1998) to allow for traders with different time-preference coefficients but identical constant relative risk-aversion coefficients. Our main result gives parameter restrictions which ensure the existence of a Radner equilibrium. As an application, we give further parameter restrictions which ensure all traders survive in the long run.

Date: 2025-12
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