We show in this paper how, in a model of assets exchange in complete competitive markets, heterogeneity of the agentÕs sub jective probabilities generates aggregate expenditures for Arrow-Debreu securities that have the gross substitutability property, with the consequences that competitive equilibrium is unique, stable in any tatonnement process, and that the weak axiom of revealed preferences is satisÞed in the aggregate. For this result, heterogeneity is required to be highest among people who have the largest risk aversion
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number
1998019.
Find related papers by JEL classification: C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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