Unawareness and bankruptcy: A general equilibrium model
AbstractWe present a consistent pure-exchange general equilibrium model where agents may not be able to foresee all possible future contingencies. In this context, even with nominal assets and complete asset markets, an equilibrium may not exist without appropriate assumptions. Specific examples are provided. An existence result is proved under the main assumption that there are sufficiently many states that all the agents foresee. An intrinsic feature of the model is bankruptcy, which agents may involuntarily experience in the unforeseen states.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 12 (1998)
Issue (Month): 2 ()
Note: Received: April 23, 1997; revised version: May 19, 1997
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Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
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