Contracting over Prices
We define a solution concept, perfectly contracted equilibrium, for an intertempo- ral exchange economy where agents are simultaneously price takers in spot commodity markets while engaging in non-Walrasian contracting over future prices. In a setting with subjective uncertainty over future prices, we show that perfectly contracted equi- librium outcomes are a subset of Pareto optimal allocations. It is a robust possibility for perfectly contracted equilibrium outcomes to differ from Arrow-Debreu equilibrium outcomes. We show that both centralized banking and retrading with bilateral con- tracting can lead to perfectly contracted equilibria.
|Date of creation:||Nov 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Adam Smith Building, Glasgow G12 8RT|
Phone: 0141 330 4618
Fax: 0141 330 4940
Web page: http://www.gla.ac.uk/schools/business/research/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Allan M. Feldman, 1973. "Bilateral Trading Processes, Pairwise Optimally, and Pareto Optimality," Review of Economic Studies, Oxford University Press, vol. 40(4), pages 463-473.
- 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.
- Kurz, Mordecai, 1994. "On Rational Belief Equilibria," Economic Theory, Springer, vol. 4(6), pages 859-76, October.
- Kurz, Mordecai & Wu, Ho-Mou, 1996.
"Endogenous Uncertainty in a General Equilibrium Model with Price Contingent Contracts,"
Springer, vol. 8(3), pages 461-88, October.
- Ho-Mou Wu & Mordecai Kurz, 1996. "Endogenous uncertainty in a general equilibrium model with price contingent contracts (*)," Economic Theory, Springer, vol. 8(3), pages 461-488.
- Mordecai Kurz & Ho-Mou Wu, . "Endogenous Uncertainty in a General Equilibrium Model with Price Contingent Contracts," Working Papers 96002, Stanford University, Department of Economics.
- Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
- 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.
When requesting a correction, please mention this item's handle: RePEc:gla:glaewp:2013_24. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jeanette Findlay)
If references are entirely missing, you can add them using this form.