Strategic Market Games with a Finite Horizon and Incomplete

Gaël Giraud and Sonia Weyers

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: We study a strategic market game associated to an intertemporal economy with a finite horizon and incomplete markets. We demonstrate that generically, for any finite number of players, every sequentially strictly individually rational and default-free stream of allocations can be approximated by a full subgame-perfect equilibrium. As a consequence, imperfect competition may Pareto-dominate perfect competition when markets are incomplete. Moreover — and this contrasts with the main message conveyed by the market games literature — there exists a large open set of initial endowments for which full subgame-perfect equilibria do not converge to η- efficient allocations when the number of players tends to infinity. Finally, strategic speculative bubbles may survive at full subgame-perfect equilibria.

Keywords: Market Games; Folk Theorem; Incomplete Markets; Bubbles. (search for similar items in EconPapers)
JEL-codes: C72 D43 D52 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2003-04

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