On the algebraic dimension of bad prices in incomplete markets with real assets
On the algebraic dimension of ''bad'' prices in incomplete markets with real assets
The paper uses the tool introduced by \textit{M. J. P. Magill} and \textit{W. J. Shafer} [J. Math. Econ. 19, No. 1/2, 167-194 (1990; Zbl 0694.90019)] viz., the stratification of bad price sets and applies it to a two period exchange economy model with incomplete markets. The paper exhibits a generic good class of real asset structures that are independent of the economy, where the class is defined by means of the dimension of the critical prices as a semi algebraic set. This class also contains commodity forward contracts and all constant-rank asset structures. As a by product of this construction, it is deduced that there is no real asset structure for which a low rank viable financial market equilibrium exists. The algebraic nature of the construction allows one to conclude that the genericity argument can be independent of the nonfinancial fundamentals of the economy. Further, the stratification approach is shown to lead to stronger results for the case of real assets.
- Existence of equilibria with incomplete markets: The case of smooth returns
- Real indeterminacy in incomplete financial market economies without aggregate risk
- Indeterminacy in general equilibrium economies with incomplete financial markets. Mixed asset returns
- Characterisation of generically complete real asset structures
- Real indeterminacy with financial assets
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