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Existence of an equilibrium in incomplete markets with discrete choices and many markets

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  • Jonathan Halket

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Abstract

We define and prove the existence of an equilibrium for Bewley-style models of heterogeneous agents in incomplete markets with discrete and continuous choices. Our sample model also features endogenous price volatility across many markets (locations) but still has a steady state equilibrium with a finite-dimensional state space. Our proof of existence uses Kakutani�s Fixed Point Theorem and does not require the set of households that are indifferent between two discrete choices to be measure zero.

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File URL: http://www.essex.ac.uk/economics/discussion-papers/papers-text/dp711.pdf
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Bibliographic Info

Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 711.

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Date of creation: 01 Mar 2012
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Handle: RePEc:esx:essedp:711

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  1. Matteo Iacoviello & Marina Pavan, 2011. "Housing and debt over the life cycle and over the business cycle," International Finance Discussion Papers 1032, Board of Governors of the Federal Reserve System (U.S.).
  2. Kartik Athreya & Nicole B. Simpson, 2004. "Unsecured debt with public insurance : from bad to worse," Working Paper 03-14, Federal Reserve Bank of Richmond.
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  5. Yongsung Chang & Sun-Bin Kim, 2006. "From Individual To Aggregate Labor Supply: A Quantitative Analysis Based On A Heterogeneous Agent Macroeconomy ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 1-27, 02.
  6. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & José-Víctor Ríos-Rull, 2007. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Econometrica, Econometric Society, vol. 75(6), pages 1525-1589, November.
  7. S. Rao Aiyagari, 1993. "Uninsured idiosyncratic risk and aggregate saving," Working Papers 502, Federal Reserve Bank of Minneapolis.
  8. Matthew Chambers & Carlos Garriga & Don Schlagenhauf, 2009. "The loan structure and housing tenure decisions in an equilibrium model of mortgage choice," Working Papers 2008-024, Federal Reserve Bank of St. Louis.
  9. Matthew Chambers & Carlos Garriga, 2005. "Accounting for Changes in the Homeownership Rate," Computing in Economics and Finance 2005 304, Society for Computational Economics.
  10. Sagiri Kitao, 2008. "Entrepreneurship, taxation and capital investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 44-69, January.
  11. Judd, Kenneth L., 1985. "The law of large numbers with a continuum of IID random variables," Journal of Economic Theory, Elsevier, vol. 35(1), pages 19-25, February.
  12. Feldman, Mark & Gilles, Christian, 1985. "An expository note on individual risk without aggregate uncertainty," Journal of Economic Theory, Elsevier, vol. 35(1), pages 26-32, February.
  13. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969.
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Cited by:
  1. Jonathan Halket & Santhanagopalan Vasudev, 2014. "Saving Up or Settling Down: Home Ownership over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 345-366, April.
  2. Jonathan Halket, 2009. "Home Ownership, Savings and Mobility Over The Life Cycle," 2009 Meeting Papers 295, Society for Economic Dynamics.

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