Indeterminacy of Cournot–Walras equilibrium with incomplete markets

Michael Zierhut ()
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Michael Zierhut: Humboldt University

Economic Theory, 2021, vol. 71, issue 1, No 3, 114 pages

Abstract: Abstract This paper studies a sole proprietorship economy with imperfect competition in a transferable utility setting. While consumers behave as price takers, producers issue real assets strategically to maximize their own utility. Even when complete markets are technologically feasible, equilibria with incomplete markets are robust, and they appear in large numbers: There is a continuum of equilibria with different asset spans that can be welfare-ranked. This real indeterminacy does not vanish as the number of producers goes to infinity. Therefore, the self-interest of producers restricts economic outcomes but does not determine them.

Keywords: Incomplete markets with production; Imperfect competition; Discontinuous games; Real indeterminacy; Endogenously incomplete markets (search for similar items in EconPapers)
JEL-codes: D43 D51 D52 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00199-020-01248-2

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