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Sequentially complete Markets Remain Incomplete

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  • Drèze,Jacques H.
  • Herings,P. Jean-Jacques

    (METEOR)

Abstract

We consider the well-known result of Arrow (1953) that the set of equilibria of an economy with complete markets coincides with the one of an economy with sequentially complete markets. We show by means of two examples that this results is problematic when there exist multiple equilibrium continuations to the initial-period component of an intertemporal equilibrium. Some consequences are drawn.

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Bibliographic Info

Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 058.

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Date of creation: 2003
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Handle: RePEc:unm:umamet:2003058

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Keywords: microeconomics ;

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  1. Mandler Michael, 1995. "Sequential Indeterminacy in Production Economies," Journal of Economic Theory, Elsevier, vol. 66(2), pages 406-436, August.
  2. Hellwig, Martin F., 1983. "A note on the implementation of rational expectations equilibria," Economics Letters, Elsevier, vol. 11(1-2), pages 1-8.
  3. Gottardi, Piero & Kajii, Atsushi, 1999. "The Structure of Sunspot Equilibria: The Role of Multiplicity," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 713-32, July.
  4. CITANNA, Alessandro & CRES, Herve & DREZE, Jacques & HERINGS, Jean-Jacques & VILLANACCI, Antonio, 2001. "Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices," Les Cahiers de Recherche 732, HEC Paris.
  5. Geanakoplos, John & Mas-Colell, Andreu, 1989. "Real indeterminacy with financial assets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 22-38, February.
  6. Timothy J. Kehoe & David K. Levine, 1982. "Comparitive Statics and Perfect Foresight in Infinite Horizon Economies," UCLA Economics Working Papers 259, UCLA Department of Economics.
  7. Herings, P. Jean-Jacques, 1998. "On the existence of a continuum of constrained equilibria1," Journal of Mathematical Economics, Elsevier, vol. 30(3), pages 257-273, October.
  8. Balasko, Yves & Cass, David, 1989. "The Structure of Financial Equilibrium with Exogenous Yields: The Case of Incomplete Markets," Econometrica, Econometric Society, vol. 57(1), pages 135-62, January.
  9. Svensson, Lars E. O., 1976. "Sequences of temporary equilibria, stationary point expectations, and Pareto efficiency," Journal of Economic Theory, Elsevier, vol. 13(2), pages 169-183, October.
  10. Felix Kubler & Herakles Polemarchakis, 2004. "Stationary Markov equilibria for overlapping generations," Economic Theory, Springer, vol. 24(3), pages 623-643, October.
  11. Michael Mandler, 2002. "Classical and Neoclassical Indeterminacy in One-shot Versus Ongoing Equilibria," Metroeconomica, Wiley Blackwell, vol. 53(3), pages 203-222, 08.
  12. 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.
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Cited by:
  1. Herings,P. Jean-Jacques & Rohde,Kirsten I.M., 2004. "On the Completeness of Complete Markets," Research Memorandum 053, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  2. Giulio Bottazzi & Pietro Dindo, 2010. "Evolution and market behavior with endogenous investment rules," LEM Papers Series 2010/20, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  3. Robin Pope & Reinhard Selten & Johannes Kaiser & Sebastian Kube & Jürgen Hagen, 2012. "Exchange rate determination: a theory of the decisive role of central bank cooperation and conflict," International Economics and Economic Policy, Springer, vol. 9(1), pages 13-51, March.

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