A remark on the supposed equivalence between complete markets and perfect foresight hypothesis
Saverio Fratini () and
Enrico Levrero ()
MPRA Paper from University Library of Munich, Germany
We consider a sequential equilibrium model over two periods, during the first of which agents have perfect information and their expectations are formed as if there were complete future markets. We show that, in the second period, equilibrium prices may well be different from those expected, without any unexpected change having occurred. This result highlights a lack of correspondence between the perfect foresight hypothesis and that of complete markets.
Keywords: Arrow-Debreu equilibrium; Complete markets; Sequential equilibrium; Perfect foresight; Indeterminacy (search for similar items in EconPapers)
JEL-codes: D46 D51 D84 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:15988
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