Contracting over Prices
AbstractWe define a solution concept, perfectly contracted equilibrium, for an intertempo- ral exchange economy where agents are simultaneously price takers in spot commodity markets while engaging in non-Walrasian contracting over future prices. In a setting with subjective uncertainty over future prices, we show that perfectly contracted equi- librium outcomes are a subset of Pareto optimal allocations. It is a robust possibility for perfectly contracted equilibrium outcomes to differ from Arrow-Debreu equilibrium outcomes. We show that both centralized banking and retrading with bilateral con- tracting can lead to perfectly contracted equilibria.
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Bibliographic InfoPaper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2013_24.
Date of creation: Nov 2013
Date of revision:
equilibrium; future prices; uncertainty; contracts;
Other versions of this item:
- Shurojit Chatterji & Sayantan Ghosal, 2012. "Contracting over Prices," Working Papers 36-2012, Singapore Management University, School of Economics.
- Chatterji, S. & Ghosal, Sayantan, 2013. "Contracting over Prices," SIRE Discussion Papers 2013-88, Scottish Institute for Research in Economics (SIRE).
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
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