Heterogeneous probabilities in complete asset markets

Laurent Calvet, Jean-Michel Grandmont () and Isabelle Lemaire
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Isabelle Lemaire: CREST-INSEE, Paris

No 1998019, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We show in this paper how, in a model of assets exchange in complete competitive markets, heterogeneity of the agent’s sub jective probabilities generates aggregate expenditures for Arrow-Debreu securities that have the gross substitutability property, with the consequences that competitive equilibrium is unique, stable in any tatonnement process, and that the weak axiom of revealed preferences is satisfied in the aggregate. For this result, heterogeneity is required to be highest among people who have the largest risk aversion

Keywords: Heterogeneity; subjective probabilities; complete asset markets. (search for similar items in EconPapers)
JEL-codes: C62 D50 G10 (search for similar items in EconPapers)
Date: 1998-03-01
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1998019

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