Existence, Regularity, and Constrained Suboptimality of Competitive Allocations When the Asset Market Is Incomplete

John Geanakoplos () and Heracles M. Polemarchakis
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John Geanakoplos: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/john-geanakoplos

No 764, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Let assets be denominated in an a priori specified numeraire. Whether or not the asset is complete, a competitive equilibrium exists as long as arbitrage is possible when assets are free. Generically, the set of competitive equilibria is finite, and the equilibrium prices and allocations in the commodity spot markets are uniquely determined by the asset allocation is generically constrained suboptimal: there exists an arbitrarily small reallocation of the existing assets, which leads to a Pareto improvement in welfare when prices and allocations in the commodity spot markets adjust to maintain equilibrium.

Keywords: Asset markets; competitive equilibria; incomplete asset markets (search for similar items in EconPapers)
Pages: 62 pages
Date: 1985-08
Note: CFP 652.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published in W. Heller, R. Starr and D. Starrett eds., Uncertainty, Information and Communication, Essays in Honor of Kenneth J. Arrow, Vol. III, Cambridge University Press, 1986, pp. 65-95

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Related works:
Working Paper: Existence,regularity, and constrained suboptimality of competitive allocations when the asset market is incomplete (1985)
Working Paper: Existence, regularity, and constrained suboptimality of competitive allocations when the asset market is incomplete
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