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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
DOI: 10.1007/s00199-006-0151-1
Contact details of provider: Web page: http://www.springer.com

Web page: http://saet.uiowa.edu/

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  1. Allouch, Nizar, 2002. "An equilibrium existence result with short selling," Journal of Mathematical Economics, Elsevier, vol. 37(2), pages 81-94, April.
  2. Jean-Marc Bonnisseau & Jean-Philippe Medecin, 2001. "Existence of marginal pricing equilibria in economies with externalities and non-convexities," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00187219, HAL.
  3. 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.
  4. Grandmont, Jean-Michel, 1977. "Temporary General Equilibrium Theory," Econometrica, Econometric Society, vol. 45(3), pages 535-72, April.
  5. Donald J. Brown & Jan Werner, 1995. "Arbitrage and Existence of Equilibrium in Infinite Asset Markets," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 101-114.
  6. Jean-Marc Bonnisseau, 1997. "Existence of Equilibria in Economies with Externalities and Nonconvexities," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00176205, HAL.
  7. Dana, Rose-Anne & Le Van, Cuong & Magnien, Francois, 1999. "On the Different Notions of Arbitrage and Existence of Equilibrium," Journal of Economic Theory, Elsevier, vol. 87(1), pages 169-193, July.
  8. Monique Florenzano, 2008. "General equilibrium," Documents de travail du Centre d'Economie de la Sorbonne b08005, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  9. Page, Frank Jr., 1996. "Arbitrage and asset prices," Mathematical Social Sciences, Elsevier, vol. 31(3), pages 183-208, June.
  10. Hammond, Peter J., 1983. "Overlapping expectations and Hart's conditions for equilibrium in a securities model," Journal of Economic Theory, Elsevier, vol. 31(1), pages 170-175, October.
  11. 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.
  12. repec:dau:papers:123456789/6228 is not listed on IDEAS
  13. Bonnisseau, Jean-Marc & Cornet, Bernard, 1990. "Existence of Marginal Cost Pricing Equilibria in Economies with Several Nonconvex Firms," Econometrica, Econometric Society, vol. 58(3), pages 661-82, May.
  14. 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.
  15. Lars Tyge Nielsen, 1989. "Asset Market Equilibrium with Short-Selling," Review of Economic Studies, Oxford University Press, vol. 56(3), pages 467-473.
  16. Werner, Jan, 1987. "Arbitrage and the Existence of Competitive Equilibrium," Econometrica, Econometric Society, vol. 55(6), pages 1403-18, November.
  17. 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.
  18. Page, Frank Jr., 1987. "On equilibrium in Hart's securities exchange model," Journal of Economic Theory, Elsevier, vol. 41(2), pages 392-404, April.
  19. 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.
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