On equilibrium in Hart's securities exchange model (Q1089239)

We use a no unbounded arbitrage condition to give a very direct proof of the existence of equilibrium in Hart's unbounded securities exchange model [see \textit{O. D. Hart}, J. Econ. Theory 9, 293-311 (1974)]. We also examine the relationship between the no unbounded arbitrage condition and the sufficiency conditions of Hart [ibid.] and \textit{P. J. Hammond} [ibid. 31, 170-175 (1983; Zbl 0523.90016)]. We present an example to show that if traders are not sufficiently risk averse, then Hammond's overlapping expectations condition is not, in general, equivalent to the no unbounded arbitrage condition or Hart's sufficiency conditions, and therefore, is not sufficient to guarantee the existence of equilibrium. We also present an example to show that it is possible for the no unbounded arbitrage condition to hold without overlapping expectations, and therefore, it is possible for equilibrium to exist without overlapping expectations.