Contracting over Prices

Shurojit Chatterji and Sayantan Ghosal

Working Papers from Business School - Economics, University of Glasgow

Abstract: We define a solution concept, perfectly contracted equilibrium, for an intertempo- ral 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 differ from Arrow-Debreu equilibrium outcomes. We show that both centralized banking and retrading with bilateral con- tracting can lead to perfectly contracted equilibria.

Keywords: equilibrium; future prices; uncertainty; contracts (search for similar items in EconPapers)
JEL-codes: D5 D70 D72 D84 (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Contracting over Prices (2013)
Working Paper: Contracting over Prices (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2013_24

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