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Equilibrium and arbitrage in incomplete asset markets with fixed prices

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Author Info
HERINGS, Jean-Jacques
POLEMARCHAKIS, Heracles

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Abstract

At arbitrary prices of commodities and assets, fix-price equilibria exist under weak assumptions: endowments need not satisfy an interiority condition, utility functions need only satisfy very weak monotonicity requirement, and the asset return matrix allows for redundant assets. Prices of assets may permit arbitrage. At equilibrium, though restricted through endogenously determined trading constraints, arbitrage possibilities may persist; in an example, an individual holds an arbitrage portfolio.

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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 2000026.

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Date of creation: 01 Mar 2000
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Handle: RePEc:cor:louvco:2000026

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Related research
Keywords: incomplete asset market; Þx-price equilibrium; arbitrage.;

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Find related papers by JEL classification:
D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
D60 - Microeconomics - - Welfare Economics - - - General

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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. Hart, Oliver D., 1975. "On the optimality of equilibrium when the market structure is incomplete," Journal of Economic Theory, Elsevier, vol. 11(3), pages 418-443, December. [Downloadable!] (restricted)
  2. Herings, P Jean-Jacques, 1996. "Equilibrium Existence Results for Economies with Price Rigidities," Economic Theory, Springer, vol. 7(1), pages 63-80, January.
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  3. Benassy, Jean-Pascal, 1975. "Neo-Keynesian Disequilibrium Theory in a Monetary Economy," Review of Economic Studies, Blackwell Publishing, vol. 42(4), pages 503-23, October. [Downloadable!] (restricted)
    Other versions:
  4. Werner, Jan, 1985. "Equilibrium in economies with incomplete financial markets," Journal of Economic Theory, Elsevier, vol. 36(1), pages 110-119, June. [Downloadable!] (restricted)
  5. Beatty, Sharon E & Smith, Scott M, 1987. " External Search Effort: An Investigation across Several Product Categories," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 14(1), pages 83-95, June.
  6. Petty, Richard E & Cacioppo, John T & Schumann, David, 1983. " Central and Peripheral Routes to Advertising Effectiveness: The Moderating Role of Involvement," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 10(2), pages 135-46, September.
  7. Krasa, Stefan & Werner, Jan, 1991. "Equilibria with options: Existence and indeterminacy," Journal of Economic Theory, Elsevier, vol. 54(2), pages 305-320, August. [Downloadable!] (restricted)
  8. Ledyard Tucker & Charles Lewis, 1973. "A reliability coefficient for maximum likelihood factor analysis," Psychometrika, Springer, vol. 38(1), pages 1-10, March. [Downloadable!] (restricted)
  9. Polemarchakis, H. M. & Ku, Bon-Il, 1990. "Options and equilibrium," Journal of Mathematical Economics, Elsevier, vol. 19(1-2), pages 107-112. [Downloadable!] (restricted)
  10. Gottardi, Piero & Hens, Thorsten, 1996. "The Survival Assumption and Existence of Competitive Equilibria When Asset Markets are Incomplete," Journal of Economic Theory, Elsevier, vol. 71(2), pages 313-323, November. [Downloadable!] (restricted)
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  11. Greenwald, Anthony G & Leavitt, Clark, 1984. " Audience Involvement in Advertising: Four Levels," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 11(1), pages 581-92, June.
  12. Dreze, Jacques H, 1975. "Existence of an Exchange Equilibrium under Price Rigidities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 301-20, June. [Downloadable!] (restricted)
  13. Duffie, Darrell & Shafer, Wayne, 1985. "Equilibrium in incomplete markets: I : A basic model of generic existence," Journal of Mathematical Economics, Elsevier, vol. 14(3), pages 285-300, June. [Downloadable!] (restricted)
  14. Lee, Hanjoon & Lindquist, Jay D. & Acito, Frank, 1997. "Managers' evaluation of research design and its impact on the use of research: An experimental approach," Journal of Business Research, Elsevier, vol. 39(3), pages 231-240, July. [Downloadable!] (restricted)
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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. P. J. J. Herings & H. M. Polemarchakis, 2003. "Pareto Improving Price Regulation When the Asset Market is Incomplete," Discussion Papers 03-20, University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
  2. Babenko, Roman & Talman, Dolf, 2006. "Quantity constrained general equilibrium," Discussion Paper 125, Tilburg University, Center for Economic Research. [Downloadable!]
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