There is an extensive litarature claiming that it is often difficult to make use of arbitrage opportunities in financial markets. This paper provides a new reason why existing arbitrage opportunities might not be seized. We consider a world with short-lived securities, no short-selling...

The literature on the computation of Nash equilibria in n-person games is dominated by simplicial methods. This paper is the first to introduce a globally convergent algorithm that fully exploits the differentiability present in the problem. It presents an everywhere differentiable homotopy to...

Both in game theory and in general equilibrium theory there exists a number of universally stable adjustment processes. In game theory these processes typically serve the role of selecting a Nash equilibrium. Examples are the tracing procedure of Harsanyi and Selten or the equilibrium selection...

Social environments constitute a framework in which it is possible to study how groups of agents interact in a society. The framework is general enough to analyse both non-cooperative and cooperative games. We identify a number of shortcomings of existing solution concepts that are used for...

The general equilibrium model with incomplete asset markets provides a unified framework for many problems in finance and macroeconomics. In its simplest version with only two time periods and a single physical commodity the model is ideally suited for the study of problems in cross sectional...

By a cooperative game in coalitional structure or shortly coalitional game we mean the standard cooperative non-transferable utility game described by a set of payoffs for each coalition that is a nonempty subset of the grand coalition of all players. It is well-known that balancedness is a...

It is well--known that a transferable utility game has a non-empty core if and only if it is balanced. In the class of non-transferable utility games balancedness or the more general pi-balancedness due to Billera (1970) is a sufficient, but not a necessary condition for the core to be...

We reconsider the allocational invariance of equilibria to different formulations of market completeness. We identify the so-far neglected assumption of sophisticated behavior as crucial to this result. The paper studies three market structures. First, the Arrow-Debreu setting is considered....

Transaction costs in financial markets may have important consequences for volumes of trade, asset pricing and welfare. In the economic literature they are often given as one reason for the incompleteness of asset markets, which is a striking example of their potential impact on volumes of...

At arbitrary prices of commodities and assets, fix-price equilibria exist under weak assumptions: endowments need not satisfy an interiority condition, utility functions need only satisfy are very weak monotonicity requirement, and the asset return matrix allows for redundant assets. Prices of...