Competitive Equilibrium with Short-selling and Nontransitivie Preferences

Guangsug Hahn and Dong Chul Won ()
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Guangsug Hahn: Korea Economic Research Institute

Korean Economic Review, 2006, vol. 22, 25-67

Abstract: The notion of arbitrage is predominantly used as a conceptual framework in finance and economics for studying equilibrium as well as pricing relations of asset markets. The consequences of equilibrium analysis based upon arbitrage, however, do not apply to the case with non-transitive preferences simply because the literature assumes the transitivity of preferences. We propose a weak notion of arbitrage which provides a sufficient condition for the existence of equilibrium of the economy where preferences need not be transitive and the consumption sets need not be bounded from below.

Keywords: short-selling; nontransitive preference; arbitrage; Walrasian equilibrium (search for similar items in EconPapers)
JEL-codes: C62 D51 D52 G12 (search for similar items in EconPapers)
Date: 2006
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