Contracting over Prices

S. Chatterji and Sayantan Ghosal

No 2013-88, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: We defi ne a solution concept, perfectly contracted equilibrium, for an intertemporal exchange economy where agents are simultaneously price takers in spot commodity markets while engaging in non-Walrasian contracting over future prices. In a setting with subjective uncertainty over future prices, we show that perfectly contracted equi- librium outcomes are a subset of Pareto optimal allocations. It is a robust possibility for perfectly contracted equilibrium outcomes to di er from Arrow-Debreu equilibrium outcomes. We show that both centralized banking and retrading with bilateral contracting can lead to perfectly contracted equilibria.

Keywords: equilibrium; future prices; uncertainty; contracts (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:edn:sirdps:505

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