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Sequentially complete markets remain incomplete

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  • DREZE, Jacques H.
  • HERINGS, Jean-Jacques P.

Abstract

We consider the well-known result of Arrow (1953) that the set of equilibria of an economy with complete markets coincides with the one of an economy with sequentially complete markets. We show by means of two examples that this results is problematic when there exist multiple equilibrium continuations to the initial-period component of an intertemporal equilibrium. Some consequences are drawn.

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File URL: http://dx.doi.org/10.1016/j.econlet.2008.03.017
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2034.

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Handle: RePEc:cor:louvrp:-2034

Note: In : Economics Letters, 100, 445-447, 2008
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  1. Geanakoplos, John & Mas-Colell, Andreu, 1989. "Real indeterminacy with financial assets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 22-38, February.
  2. Felix Kubler & Herakles Polemarchakis, 2004. "Stationary Markov equilibria for overlapping generations," Economic Theory, Springer, vol. 24(3), pages 623-643, October.
  3. Hellwig, Martin F., 1983. "A note on the implementation of rational expectations equilibria," Economics Letters, Elsevier, vol. 11(1-2), pages 1-8.
  4. Timothy J. Kehoe & David K. Levine, 1982. "Comparitive Statics and Perfect Foresight in Infinite Horizon Economies," UCLA Economics Working Papers 259, UCLA Department of Economics.
  5. Radner, Roy, 1972. "Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets," Econometrica, Econometric Society, vol. 40(2), pages 289-303, March.
  6. CITANNA, Alessandro & CRES, Herve & DREZE, Jacques & HERINGS, Jean-Jacques & VILLANACCI, Antonio, 2001. "Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices," Les Cahiers de Recherche 732, HEC Paris.
  7. Herings, P. Jean-Jacques, 1998. "On the existence of a continuum of constrained equilibria1," Journal of Mathematical Economics, Elsevier, vol. 30(3), pages 257-273, October.
  8. Mandler Michael, 1995. "Sequential Indeterminacy in Production Economies," Journal of Economic Theory, Elsevier, vol. 66(2), pages 406-436, August.
  9. Balasko, Yves & Cass, David, 1989. "The Structure of Financial Equilibrium with Exogenous Yields: The Case of Incomplete Markets," Econometrica, Econometric Society, vol. 57(1), pages 135-62, January.
  10. Gottardi, Piero & Kajii, Atsushi, 1999. "The Structure of Sunspot Equilibria: The Role of Multiplicity," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 713-32, July.
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Cited by:
  1. P. Herings & Kirsten Rohde, 2008. "On the completeness of complete markets," Economic Theory, Springer, vol. 37(2), pages 171-201, November.
  2. Giulio Bottazzi & Pietro Dindo, 2010. "Evolution and market behavior with endogenous investment rules," LEM Papers Series 2010/20, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  3. Robin Pope & Reinhard Selten & Johannes Kaiser & Sebastian Kube & Jürgen Hagen, 2012. "Exchange rate determination: a theory of the decisive role of central bank cooperation and conflict," International Economics and Economic Policy, Springer, vol. 9(1), pages 13-51, March.

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