Consumption choice and asset pricing with a non-price-taking agent

Suleyman Basak

Economic Theory, 1997, vol. 10, issue 3, 437-462

Abstract: This paper develops a pure-exchange model to study the consumption-portfolio problem of an agent who acts as a non-price-taker, and to analyze the implications of his behavior on equilibrium security prices. The non-price-taker is modeled as a price leader in all markets; his price impact is then recast as a dependence of the Arrow-Debreu prices on his consumption, allowing a tractable formulation. Besides the aggregate consumption, the endowment of the non-price-taker appears as an additional factor in driving equilibrium allocations and prices. Comparisons of equilibria between a price-taking and a non-price-taking economy are carried out.

JEL-codes: C60 D42 D51 D90 G12 (search for similar items in EconPapers)
Date: 1997-09-16
Note: Received: March 29, 1996; revised version October 29, 1996
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Citations: View citations in EconPapers (13)

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