Intertemporal effiiency does not imply a common price forecast
Atsushi Kajii and
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Shurojit Chatterji: Singapore Management University
Huaxia Zeng: Shanghai University of Finance and Economics
No 999, KIER Working Papers from Kyoto University, Institute of Economic Research
Do price forecasts of rational economic agents need to coincide in perfectly com- petitive complete markets? To address this question, we define an efficient tempo- rary equilibrium (ETE) within the framework of a two period economy. Although an ETE allocation is intertemporally efficient and is obtained by perfect competition, it can arise without the agents forecasts being coordinated on a perfect foresight price. We show that there is a one dimensional set of such Pareto efficient allocations for generic endowments.
JEL-codes: D51 D53 D61 (search for similar items in EconPapers)
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