A remark on the supposed equivalence between complete markets and perfect foresight hypothesis
AbstractWe consider a sequential equilibrium model over two periods, during the first of which agents have perfect information and their expectations are formed as if there were complete future markets. We show that, in the second period, equilibrium prices may well be different from those expected, without any unexpected change having occurred. This result highlights a lack of correspondence between the perfect foresight hypothesis and that of complete markets.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 15988.
Date of creation: Jun 2009
Date of revision:
Arrow-Debreu equilibrium; Complete markets; Sequential equilibrium; Perfect foresight; Indeterminacy;
Find related papers by JEL classification:
- D46 - Microeconomics - - Market Structure and Pricing - - - Value Theory
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
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