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Competitive Equilibrium with Short-selling and Nontransitivie Preferences

Author

Listed:
  • Guangsug Hahn

    (Korea Economic Research Institute)

  • Dongchul Won

    (Ajou University)

Abstract

The notion of arbitrage is predominantly used as a conceptual framework in finance and economics for studying equilibrium as well as pricing relations of asset markets. The consequences of equilibrium analysis based upon arbitrage, however, do not apply to the case with non-transitive preferences simply because the literature assumes the transitivity of preferences. We propose a weak notion of arbitrage which provides a sufficient condition for the existence of equilibrium of the economy where preferences need not be transitive and the consumption sets need not be bounded from below.

Suggested Citation

  • Guangsug Hahn & Dongchul Won, 2006. "Competitive Equilibrium with Short-selling and Nontransitivie Preferences," Korean Economic Review, Korean Economic Association, vol. 22, pages 25-67.
    • Handle: RePEc:kea:keappr:ker-20060630-22-1-03
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    More about this item

    Keywords

    short-selling; nontransitive preference; arbitrage; Walrasian equilibrium;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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