 Decentralizability of efficient allocations with heterogeneous forecastsShurojit Chatterji and Atsushi Kajii Journal of Economic Theory, 2023, vol. 207, issue C Abstract: Do price forecasts of rational economic agents need to coincide in intertemporal perfectly competitive complete markets in order for markets to allocate resources efficiently? To address this question, we define an efficient temporary equilibrium (ETE) within the framework of a two period economy. Although an ETE allocation is intertemporally efficient and is obtained by perfect competition, it can arise without the agents' forecasts being coordinated on a perfect foresight price. With time-separable utilities, we show that there is a one dimensional set of ETE allocations for generic endowments. Moreover, these efficient allocations can be supported by forecasts that disagree up to one degree of freedom. Thus, strong as efficiency and perfect competition may appear, they do not imply perfect foresight, but they do add explanatory power to temporary equilibrium, since they select a small subset out of the Pareto efficient allocations, which generally have higher dimension. Keywords: General equilibrium; Efficient temporary equilibrium; Endogenous price forecasts; Indeterminacy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:207:y:2023:i:c:s002205312200182x DOI: 10.1016/j.jet.2022.105592 Access Statistics for this article Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell More articles in Journal of Economic Theory from Elsevier |
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