Notes on the Suboptimality Result of J. D. Geanakoplos and H. M. Polemarchakis (1986)
AbstractJ. D. Geanakoplos and H. M. Polemarchakis (1986) prove the generic constrained suboptimality of equilibrium allocations in two period economies with incomplete markets. They perturb asset prices at equilibrium when the degree of market incompleteness equals one. Since prices do not parameterize the economy, a generic result cannot be obtained in such a way. These notes provide a detailed version of their proof in which utilities and endowments are perturbed.
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Bibliographic InfoArticle provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.
Volume (Year): 22 (2007)
Issue (Month): 1 ()
incomplete asset markets constrained suboptimality; transversality theory.;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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- Atsushi Kajii & Antonio Villanacci & Alessandro Citanna, 1998. "Constrained suboptimality in incomplete markets: a general approach and two applications," Economic Theory, Springer, Springer, vol. 11(3), pages 495-521.
- Stiglitz, Joseph E, 1982. "The Inefficiency of the Stock Market Equilibrium," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(2), pages 241-61, April.
- Newbery, David M G & Stiglitz, Joseph E, 1982. "The Choice of Techniques and the Optimality of Market Equilibrium with Rational Expectations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(2), pages 223-46, April.
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