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In an incomplete asset market, firms assign values to investment plans by projecting their payoffs on the span of the payoffs of marketed assets; equivalently, firms employ the Capital Asset Pricing Model. This is a criterion that does not require firms to possess information, such as the...
Persistent link: https://www.econbiz.de/10005087397
Let assets be denominated in an a priori specified numeraire. Whether or not the asset is complete, a competitive equilibrium exists as long as arbitrage is possible when assets are free. Generically, the set of competitive equilibria is finite, and the equilibrium prices and allocations in the...
Persistent link: https://www.econbiz.de/10004990756
Under the assumption of common priors, if the information partitions of two agents are finite, then simply by communicating back and forth and revising their posteriors the two agents will converge to a common equilibrium posterior, even though they may base their posteriors on quite different...
Persistent link: https://www.econbiz.de/10004990768
Overlapping generations models with or without production or a portfolio demand for money display a fundamental indeterminacy. Expectations matter; and they are not, in the short run, constrained by the hypotheses of agent optimization, rational expectations, and market clearing. No short run...
Persistent link: https://www.econbiz.de/10005762753
When the asset market is incomplete, competitive equilibria are constrained suboptimal, which provides a scope for pareto improving interventions. Price regulation can be such a pareto improving policy, even when the welfare effects of rationing are taken into account. An appealing aspect of...
Persistent link: https://www.econbiz.de/10005093927
Competitive equilibrium allocations are indeterminate when the net trades in commodities are constrained, while the asset market is incomplete.
Persistent link: https://www.econbiz.de/10005463855
Persistent link: https://www.econbiz.de/10005464034
When government liabilities (including money) are held in private portfolios only as stores of value, and do not provide additional benefits (as liquidity services), the real variables in an economy with uncertainty are not affected by the government's trading in assets. There are also policies...
Persistent link: https://www.econbiz.de/10005593348
Persistent link: https://www.econbiz.de/10005593535
A feasible social state is irreducible if and only if, for any non-trivial partition of individuals with two groups, there exists another feasible social state at which every individual in the first group is equally well-off and someone strictly better-off. Competitive equilibria decentralize...
Persistent link: https://www.econbiz.de/10005593635