Endogenous Financing of Production in General Equilibrium with Incomplete Markets
AbstractThis paper considers the financing of production in a two period general equilibrium model with incomplete markets. This requires a model where the efficient boundary of the production set available to a producer in period two in every state of the world is not independent of the financial activities of the firm in period one. The novelty of the paper is a definition of a class of long run profit maximization objective functions of the firm which is independent of any average utility of the owners of the firm. This generalizes the traditional objective of profit maximization of the Arrow-Debreu model to the case of incomplete markets. The paper shows that equilibrium exists for convex smooth and convex piecewise linear endogenized production sets.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 10/20.
Date of creation: Jul 2010
Date of revision:
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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
Fax: (0)1904 323759
Web page: http://www.york.ac.uk/economics/
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Existence; Incomplete Markets; Pro t Maximization; Production.;
Find related papers by JEL classification:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-06 (All new papers)
- NEP-BEC-2010-08-06 (Business Economics)
- NEP-MIC-2010-08-06 (Microeconomics)
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