Implementing Arrow-Debreu equilibria by trading infinitely-lived securities

Kevin Huang () and Jan Werner

No RWP 02-08, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: We show that Arrow-Debreu equilibria with countably additive prices in infinite-time economy under uncertainty can be implemented by trading infinitely-lived securities in complete sequential markets under two different portfolio feasibility constraints: wealth constraint, and essentially bounded portfolios. Sequential equilibria with no price bubbles implement Arrow-Debreu equilibria, while those with price bubbles implement Arrow-Debreu equilibria with transfers. Transfers are equal to price bubbles on initial portfolio holdings. Price bubbles arise in sequential equilibrium under the wealth constraint if some securities are in zero supply or negative prices are permitted, but cannot arise with essentially bounded portfolios.

Keywords: Prices; Equilibrium (Economics) (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-dge, nep-fin, nep-fmk and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.kansascityfed.org/documents/5399/pdf-RWP02-08.pdf (application/pdf)

Related works:
Journal Article: Implementing Arrow-Debreu equilibria by trading infinitely-lived securities (2004)
Working Paper: Implementing Arrow-Debreu Equilibria by Trading Infinitely-Lived Securities (2000)
Working Paper: Implementing Arrow-Debreu equilibria by trading infinitely lived securities
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:fip:fedkrw:rwp02-08

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Research Working Paper from Federal Reserve Bank of Kansas City Contact information at EDIRC.
Bibliographic data for series maintained by Zach Kastens ().