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Risky arbitrage, asset prices, and externalities

  • Cuong Van

    ()

  • Frank Page

    ()

  • Myrna Wooders

    ()

We introduce a no-risky-arbitrage price (NRAP) condition for asset market models allowing both unbounded short sales and externalities such as trading volume. We then demonstrate that the NRAP condition is sufficient for the existence of competitive equilibrium in the presence of externalities. Moreover, we show that if all risky arbitrages are utility increasing, then the NRAP condition characterizes competitive equilibrium in the presence of externalities.

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File URL: http://hdl.handle.net/10.1007/s00199-006-0151-1
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Article provided by Springer & Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 33 (2007)
Issue (Month): 3 (December)
Pages: 475-491

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Handle: RePEc:spr:joecth:v:33:y:2007:i:3:p:475-491
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  1. Brown, Donald & Werner, Jan, 1993. "Arbitrage and Existence of Equilibrium in Infinite Asset Markets," Working Papers 825, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Kreps, David M., 1981. "Arbitrage and equilibrium in economies with infinitely many commodities," Journal of Mathematical Economics, Elsevier, vol. 8(1), pages 15-35, March.
  3. Hart, Oliver D., 1974. "On the existence of equilibrium in a securities model," Journal of Economic Theory, Elsevier, vol. 9(3), pages 293-311, November.
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  8. Dana, Rose-Anne & Le Van, Cuong & Magnien, François, 1996. "On the different notions of arbitrage and existence of equilibrium," CEPREMAP Working Papers (Couverture Orange) 9616, CEPREMAP.
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  11. BONNISSEAU, Jean-Marc & CORNET, Bernard, . "Existence of marginal cost pricing equilibria in economies with several nonconvex firms," CORE Discussion Papers RP 941, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Page, Frank Jr., 1996. "Arbitrage and asset prices," Mathematical Social Sciences, Elsevier, vol. 31(3), pages 183-208, June.
  13. Green, Jerry R, 1973. "Temporary General Equilibrium in a Sequential Trading Model with Spot and Futures Transactions," Econometrica, Econometric Society, vol. 41(6), pages 1103-23, November.
  14. Grandmont, Jean-Michel, 1993. "Temporary general equilibrium theory," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 19, pages 879-922 Elsevier.
  15. Page, F.H.Jr. & Wooders, M.H. & Monteiro, P.K., 1999. "Inconsequential Arbitrage," The Warwick Economics Research Paper Series (TWERPS) 561, University of Warwick, Department of Economics.
  16. Le Van, C. & Page, F.H.Jr. & Wooders, M., 2001. "Arbitrage and Equilibrium in Economies with Externalities," The Warwick Economics Research Paper Series (TWERPS) 588, University of Warwick, Department of Economics.
  17. Page, Frank Jr., 1987. "On equilibrium in Hart's securities exchange model," Journal of Economic Theory, Elsevier, vol. 41(2), pages 392-404, April.
  18. Allouch, Nizar, 2002. "An equilibrium existence result with short selling," Journal of Mathematical Economics, Elsevier, vol. 37(2), pages 81-94, April.
  19. Werner, Jan, 1987. "Arbitrage and the Existence of Competitive Equilibrium," Econometrica, Econometric Society, vol. 55(6), pages 1403-18, November.
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