General equilibrium with private state verification

Joao Correia-da-Silva and Carlos Hervés-Beloso

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: We study general equilibrium with private and incomplete state verification. Trade is agreed ex ante, that is, before private information is received. It is useful to define a list of bundles as a derivative good that gives an agent the right to receive one of the bundles in the list. Enforceable trade agreements can be described by Pi-measurable plans of lists of bundles, instead of Pi-measurable plans of bundles as in Radner (1968). In equilibrium, the price of a list coincides with the price of the cheapest bundle in the list, and it is always the cheapest bundle of the list that is delivered. This property leads to a system of linear inequalities which are deliverability constraints on the choice set. We investigate existence of equilibrium in the case in which preferences are Pi-measurable. If there is a perfectly informed trader in the economy, existence of equilibrium is guaranteed.

Keywords: General equilibrium; Differential information; Verifiability; Uncertain delivery; Lists of bundles; Rational expectations (search for similar items in EconPapers)
JEL-codes: C62 D51 D82 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2008-03
New Economics Papers: this item is included in nep-cta
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Citations: View citations in EconPapers (2)

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Working Paper: General equilibrium with private state verification (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:269

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