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Nash equilibria applied to Spot-financial equilibria in General equilibrium incomplete market models

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  • Fugarolas, Guadalupe

Abstract

We consider a two period pure exchange economy with a finite number of states of nature at the second date. The economy consists of a real asset structure and a finite set of durable goods in the initial period that depreciate; we suppose that there is only one single good available in each state of nature at the second date. In this paper, we demonstrate that the spot-financial equilibrium can be obtained as a Nash equilibrium of a market game in which the strategies of the players consist in suggesting prices and quantities for both goods and assets.

Suggested Citation

  • Fugarolas, Guadalupe, 2006. "Nash equilibria applied to Spot-financial equilibria in General equilibrium incomplete market models," MPRA Paper 470, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:470
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    File URL: https://mpra.ub.uni-muenchen.de/470/1/MPRA_paper_470.pdf
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    References listed on IDEAS

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    1. Dubey, Pradeep & Geanakoplos, John, 2003. "From Nash to Walras via Shapley-Shubik," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 391-400, July.
    2. John Geanakoplos & Heracles M. Polemarchakis, 1985. "Existence, Regularity, and Constrained Suboptimality of Competitive Allocations When the Asset Market Is Incomplete," Cowles Foundation Discussion Papers 764, Cowles Foundation for Research in Economics, Yale University.
    3. Dubey, Pradeep & Shapley, Lloyd S., 1994. "Noncooperative general exchange with a continuum of traders: Two models," Journal of Mathematical Economics, Elsevier, vol. 23(3), pages 253-293, May.
    4. Schmeidler, David, 1980. "Walrasian Analysis via Strategic Outcome Functions," Econometrica, Econometric Society, vol. 48(7), pages 1585-1593, November.
    5. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614, Elsevier.
    6. Hart, Oliver D., 1975. "On the optimality of equilibrium when the market structure is incomplete," Journal of Economic Theory, Elsevier, vol. 11(3), pages 418-443, December.
    7. Radner, Roy, 1972. "Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets," Econometrica, Econometric Society, vol. 40(2), pages 289-303, March.
    8. Geanakoplos, J. & Magill, M. & Quinzii, M. & Dreze, J., 1990. "Generic inefficiency of stock market equilibrium when markets are incomplete," Journal of Mathematical Economics, Elsevier, vol. 19(1-2), pages 113-151.
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    More about this item

    Keywords

    Incomplete markets; market games; Nash equilibrium; strategic outcome functions;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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