Equilibrium with asymmetric information and restricted participation: the no-arbitrage characterization

Lionel De Boisdeffre (lionel.de.boisdeffre@wanadoo.fr)
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Lionel De Boisdeffre: Université Paris 1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.cnrs.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: The paper presents a pure exchange economy, where consumers may have asymmetric information, non-ordered preferences and a restricted access to purely financial markets. Under standard conditions, it shows that the two concepts of no-arbitrage price and equilibrium asset price coincide. Namely, any collection of state prices in realizable states is proved to support a sequential equilibrium. This result extends Cass (2006), De Boisdeffre (2007) and similar results of symmetric information, such as Martins-da-Rocha and Triki's (2005) or Cornet and Gopalan's (2010). Moreover, the definition and existence of the sequential equilibrium do not rely on Radner's (1972, 1979) rational expectation assumptions, which may be dropped

Keywords: incomplete markets; restricted participation; arbitrage; existence of equilibrium; rational expectations; perfect foresight; asymmetric information (search for similar items in EconPapers)
JEL-codes: D52 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2024-06
New Economics Papers: this item is included in nep-mic
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http://mse.univ-paris1.fr/pub/mse/CES2024/24005.pdf (application/pdf)
https://shs.hal.science/halshs-04612814

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