Strategic market games with a finite horizon and incomplete markets

Gaël Giraud and Sonia Weyers ()

Economic Theory, 2004, vol. 23, issue 3, 467-491

Abstract: We study a strategic market game associated to an intertemporal economy with a finite horizon and incomplete markets. We demonstrate that generically, for any finite number of players, every sequentially strictly individually rational and default-free stream of allocations can be approximated by a full subgame-perfect equilibrium. As a consequence, imperfect competition may Pareto-dominate perfect competition when markets are incomplete. Moreover - and this contrasts with the main message conveyed by the market games literature - there exists a large open set of initial endowments for which full subgame-perfect equilibria do not converge to $\eta$ -efficient allocations when the number of players tends to infinity. Finally, strategic speculative bubbles may survive at full subgame-perfect equilibria. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Strategic market games; Folk theorem; Incomplete markets; Bubbles. (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (18)

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Working Paper: Strategic Market Games with a Finite Horizon and Incomplete Markets (2004)
Working Paper: Strategic Market Games with a Finite Horizon and Incomplete Markets (2004)
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DOI: 10.1007/s00199-003-0389-9

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