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General equilibrium with private state verification

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Author Info
João Correia-da-Silva () (CEMPRE and Faculdade de Economia, Universidade do Porto, Portugal)
Carlos Hervés-Beloso () (RGEA and Facultad de Económicas, Universidad de Vigo, Spain)

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Abstract

We study general equilibrium with private and incomplete state verification. Trade is agreed ex ante, that is, before private information is received. It is useful to define a list of bundles as a derivative good that gives an agent the right to receive one of the bundles in the list. Enforceable trade agreements can be described by Pi-measurable plans of lists of bundles, instead of Pi-measurable plans of bundles as in Radner (1968). In equilibrium, the price of a list coincides with the price of the cheapest bundle in the list, and it is always the cheapest bundle of the list that is delivered. This property leads to a system of linear inequalities which are deliverability constraints on the choice set. We investigate existence of equilibrium in the case in which preferences are Pi-measurable. If there is a perfectly informed trader in the economy, existence of equilibrium is guaranteed.

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Publisher Info
Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 269.

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Length: 57 pages
Date of creation: Mar 2008
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Handle: RePEc:por:fepwps:269

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Related research
Keywords: General equilibrium Differential information Verifiability Uncertain delivery Lists of bundles Rational expectations

Find related papers by JEL classification:
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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This page was last updated on 2008-11-5.

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