Existence and structure of stochastic equilibria with intertemporal substitution

Frank Riedel and Peter Bank ()
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Peter Bank: Institut für Mathematik, Humboldt-Universität zu Berlin, Unter den Linden 6, D-10099 Berlin, Germany

Finance and Stochastics, 2001, vol. 5, issue 4, 487-509

Abstract: We prove existence of an Arrow-Debreu equilibrium when agents' preferences exhibit local substitution in the sense of Hindy, Huang, and Kreps (1992). Efficient allocations and supporting price functionals are identified and characterized. Under Hindy-Huang-Kreps preferences, equilibrium price processes are semimartingales for arbitrary endowments, but in general, they do not belong to the space suggested originally by Hindy and Huang (1992) due to an additional singular local time component.

Keywords: General equilibrium; local substitution; non time additive utility (search for similar items in EconPapers)
JEL-codes: D51 D91 (search for similar items in EconPapers)
Date: 2001-10-04
Note: received: July 2000; final version received: January 2001
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Citations: View citations in EconPapers (17)

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