Notes on the Suboptimality Result by J. D. Geanakoplos and H. M. Polemarchakis (1986)
AbstractJ. D. Geanakoplos and H. M. Polemarchakis (1986) prove the generic constrained suboptimality of equilibrium allocations in two period economies with incomplete markets. They perturb asset prices at equilibrium when the degree of market incompleteness equals one. However, since prices are not fundamentals that parameterize the economy, a generic result cannot be obtained in such a way. In these notes we provide complete and detailed version of their proof in which the arguments do not depend on the dimension of the market incompleteness and in which utilities and endowments are perturbed.
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Bibliographic InfoPaper provided by Universidad de Guanajuato, Department of Economics and Finance in its series Department of Economics and Finance Working Papers with number EC200507.
Length: 19 pages
Date of creation: Jul 2002
Date of revision: Dec 2005
Publication status: Published in Estudios Economicos
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Incomplete Asset Markets; Constrained Suboptimality; Transversality Theory;
Other versions of this item:
- Antonio Jimenez-Martínez, 2007. "Notes on the Suboptimality Result of J. D. Geanakoplos and H. M. Polemarchakis (1986)," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 22(1), pages 111-136.
- A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D60 - Microeconomics - - Welfare Economics - - - General
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