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Consumption choice and asset pricing with a non-price-taking agent

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Author Info
Suleyman Basak (Finance Department, The Wharton School, University of Pennsylvania, Philadelphia, PA 19104-6367, USA)
Abstract

This paper develops a pure-exchange model to study the consumption-portfolio problem of an agent who acts as a non-price-taker, and to analyze the implications of his behavior on equilibrium security prices. The non-price-taker is modeled as a price leader in all markets; his price impact is then recast as a dependence of the Arrow-Debreu prices on his consumption, allowing a tractable formulation. Besides the aggregate consumption, the endowment of the non-price-taker appears as an additional factor in driving equilibrium allocations and prices. Comparisons of equilibria between a price-taking and a non-price-taking economy are carried out.

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Publisher Info
Article provided by Springer in its journal Economic Theory.

Volume (Year): 10 (1997)
Issue (Month): 3 ()
Pages: 437-462
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Handle: RePEc:spr:joecth:v:10:y:1997:i:3:p:437-462

Note: Received: March 29, 1996; revised version October 29, 1996
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Keywords:

Find related papers by JEL classification:
C60 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - General
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matthew Pritsker, 2005. "Large investors: implications for equilibrium asset, returns, shock absorption, and liquidity," Finance and Economics Discussion Series 2005-36, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  2. Basak, Suleyman & Pavlova, Anna, 2004. "Monopoly Power and the Firm€ٳ Valuation:," Working papers 4234-01, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  3. Basak, Suleyman & Pavlova, Anna, 2003. "Monopoly Power And The Firm'S Valuation: A Dynamic Analysis Of Short Versus Long-Term Policies," Working papers 4234-01, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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