Notes on the Suboptimality Result of J. D. Geanakoplos and H. M. Polemarchakis (1986)
J. D. Geanakoplos and H. M. Polemarchakis (1986) prove the generic constrained suboptimality of equilibrium allocations in two period economies with incomplete markets. They perturb asset prices at equilibrium when the degree of market incompleteness equals one. Since prices do not parameterize the economy, a generic result cannot be obtained in such a way. These notes provide a detailed version of their proof in which utilities and endowments are perturbed.
Volume (Year): 22 (2007)
Issue (Month): 1 ()
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"Constrained suboptimality in incomplete markets: a general approach and two applications,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 495-521.
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- Joseph E. Stiglitz, 1982. "The Inefficiency of the Stock Market Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 241-261.
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