Walrasian non-tatonnement with incomplete and imperfectly competitive markets

Gaël Giraud

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

Abstract: Static competitive equilibria in economies with incomplete markets are generically constrained suboptimal. Allocations induced by strategic equilibria of imperfectly competitive markets are also generically inefficient. In both cases, there is scope for Pareto-improving amendments. In an extension of the limit-price process introduced in Giraud [20] to incomplete markets (with infinitely many uncertain states) populated by finitely many players, we show that these two inefficiency problems can be partially overcome when rephrased in a non-tatonnement process. Traders are myopic and trade financial securities in continuous time by sending limit-orders so as to select a portfolio that maximizes the first-order approximation of their expected indirect utility. We show that financial trade curves exist and converge to some second-best efficient restpoint unless some miscoordination stops the dynamics at some inefficient, but locally unstable point

Keywords: Incompet markets; imperfect competition; second-best efficiency; non-tatonnement (search for similar items in EconPapers)
JEL-codes: D11 D41 D50 E1 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2007-04
New Economics Papers: this item is included in nep-mic
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Related works:
Working Paper: Walrasian Non-tatonnement with Incomplete and Imperfectly Competitive Markets (2007)
Working Paper: Walrasian Non-tatonnement with Incomplete and Imperfectly Competitive Markets (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:b07021

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