Variational Formulation of a General Equilibrium Model with Incomplete Financial Markets and Numeraire Assets: Existence

Maria Bernadette Donato (), Monica Milasi () and Antonio Villanacci ()
Additional contact information
Maria Bernadette Donato: University of Messina
Monica Milasi: University of Messina
Antonio Villanacci: University of Firenze

Journal of Optimization Theory and Applications, 2018, vol. 179, issue 2, No 4, 425-451

Abstract: Abstract We present a general equilibrium model with incomplete financial markets and numeraire assets. We assume that there are 2 periods of time, say today and tomorrow. In period 0, households exchange goods and assets and then consumption takes place; in period 1, one of S possible states of nature occurs. In each of them, assets pay their returns, which are measured in units of a given physical good, i.e., the numeraire commodity; households exchange goods; finally, consumption takes place. We define a consumption, portfolio holding, commodity and asset price vector as an equilibrium vector associated with a given economy, if at those prices and economies households maximize, and market clears. While the existence proof by Geneakoplos and Polemarchakis (Essays in honor of K.J. Arrow, vol 3, Cambridge University Press, Cambridge, pp 65–95, 1986) uses a fixed point argument, we provide an independent existence result in terms of variational inequalities. That approach allows us to get the desired existence result under some different and more general or realistic assumptions than those usually made in the literature.

Keywords: General equilibrium; Incomplete markets; Numeraire assets; Quasivariational and variational inequalities; 49J53; 91B50 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10957-018-1388-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joptap:v:179:y:2018:i:2:d:10.1007_s10957-018-1388-0

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10957/PS2

DOI: 10.1007/s10957-018-1388-0

Access Statistics for this article

Journal of Optimization Theory and Applications is currently edited by Franco Giannessi and David G. Hull

More articles in Journal of Optimization Theory and Applications from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().