Generic inefficiency of equilibria in the general equilibrium model with incomplete asset markets and infinite time (Q1407766): Difference between revisions
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Latest revision as of 19:51, 19 March 2024
scientific article
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English | Generic inefficiency of equilibria in the general equilibrium model with incomplete asset markets and infinite time |
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Generic inefficiency of equilibria in the general equilibrium model with incomplete asset markets and infinite time (English)
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21 September 2003
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The referred paper offers an extension of the general equilibrium model in incomplete financial markets with infinite time-horizon. The suggested modification regards the economies in which the endowments and dividends are represented by time-invariant function depending on the shock, exclusively. The shocks are assumed to take only a finite number of different values. Then the endowments and dividends are restricted to a finite-dimensional space, and it is shown that for all Pareto efficient equilibria, the prices, portfolio-holdings and consumptions are restricted to a finite-dimensional set, even if the equilibrium consumption and asset prices themselves are variable. Further result regards the suboptimality under the assumption of an implicit debt constraint.
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incomplete markets
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heterogeneous agents
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inefficient equilibria
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Lucas asset-pricing model
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assets
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financial market
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