Financial and Thermodynamic Equilibrium

Antonio Roma

Economic Notes, 2000, vol. 29, issue 3, 341-354

Abstract: type="main" xml:lang="en">

This paper explores general equilibrium asset pricing implications in a two-period model in which the production side explicitly describes the thermodynamic process unavoidably connected with production. We show that steady state of the production process, i.e. thermodynamic equilibrium, has a one-to-one correspondence with the absence of arbitrage possibilities. This provides an alternative definition of the absence of arbitrage.

(J.E.L.: D5, G1, R3)

Date: 2000
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