Notes on optimality of rational expectations equilibrium with incomplete markets (Q1096518): Difference between revisions
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Revision as of 23:14, 19 March 2024
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| English | Notes on optimality of rational expectations equilibrium with incomplete markets |
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Notes on optimality of rational expectations equilibrium with incomplete markets (English)
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1987
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This paper shows that under certain conditions, an economy with securities and post-state spot markets can support rational expectations equilibria of economies in a partial Arrow-Debreu regime of incomplete contingent markets. Using these conditions, examples are constructed to show that non-optimal equilibria might exist for the securities regime and introduction of additional securities might make everyone worse off. These examples are shown to be robust and valid in a more general context than those of Hart.
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post-state spot markets
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rational expectations equilibria
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incomplete contingent markets
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