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Sequentially complete markets remain incomplete

  • DRÈZE, Jacques
  • HERINGS, Jean-Jacques

We reconsider 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 result 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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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2003085.

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Date of creation: 00 Nov 2003
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Handle: RePEc:cor:louvco:2003085
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  1. 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.
  2. John Geanakoplos & Andreu Mas-Colell, 1985. "Real Indeterminacy with Financial Assets," Cowles Foundation Discussion Papers 770R, Cowles Foundation for Research in Economics, Yale University, revised Oct 1985.
  3. Hellwig, Martin F., 1983. "A note on the implementation of rational expectations equilibria," Economics Letters, Elsevier, vol. 11(1-2), pages 1-8.
  4. 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.
  5. Felix Kubler & Herakles Polemarchakis, 2004. "Stationary Markov equilibria for overlapping generations," Economic Theory, Springer, vol. 24(3), pages 623-643, October.
  6. 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.
  7. 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.
  8. Mandler Michael, 1995. "Sequential Indeterminacy in Production Economies," Journal of Economic Theory, Elsevier, vol. 66(2), pages 406-436, August.
  9. 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.
  10. Michael Mandler, 2002. "Classical and Neoclassical Indeterminacy in One-shot Versus Ongoing Equilibria," Metroeconomica, Wiley Blackwell, vol. 53(3), pages 203-222, 08.
  11. 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.
  12. 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.
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