Competitive Equilibrium with Asymmetric Information: an Existence Theorem for Numeraire Assets

Lionel Boisdeffre
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Lionel Boisdeffre: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour

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Abstract: In [2], we had extended the classical concepts and arbitrage theory of symmetric information, to an asymmetric information model, which dropped Radner?s (1979) rational expectations' ?assumption. In [3], we showed how agents could infer enough information, in this model, to rule out arbitrage from markets. In [4], we extended to that model Cass?(1984) classical existence Theorem for nominal assets. Namely, we showed that existence of equilibrium was characterized by the generalized no-arbitrage condition introduced in [2], whether agents had symmetric or asymmetric information. We now display the same characteristic property for numeraire asset markets, and, thus, extend Geanakoplos-Polemarchakis?(1986) existence Theorem to the asymmetric information setting. Contrasting with Radner?s, these results show that symmetric and asymmetric information economies can be embedded into a common general equilibrium model, where they share similar properties.

Keywords: General equilibrium; Asymmetric information; Arbitrage; Existence (search for similar items in EconPapers)
Date: 2015-04
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