Non-existence of equilibrium in an incomplete stock market economy (Q5931983)

The model of a production economy with incomplete stock markets and finite numbers of consumers, firms and states of nature, is considered. Each firm uses a criterion to determine its present value coefficient, and this criterion is derived from the present value coefficient of it's new shareholders. The main attention is focused on the non-existence of the equilibrium of such an economy. It is shown that the non-existence follows from the discontinuity of the present value coefficients of the firms, and, consequently, from the discontinuity of the excess demand functions.