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Walrasian Non-tâtonnement with Incomplete and Imperfectly Competitive Markets

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  • Gaël Giraud

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne)

Abstract

Static competitive equilibria in economies with incomplete markets are generically constrained suboptimal. Allocations induced by strategic equilibria of imperfectly competitive markets are also generically inefficient. In both cases, there is scope for Pareto-improving amendments. In an extension of the limit-price process introduced in Giraud [20] to incomplete markets (with infinitely many uncertain states) populated by finitely many players, we show that these two inefficiency problems can be partially overcome when rephrased in a non-tatonnement process. Traders are myopic and trade financial securities in continuous time by sending limit-orders so as to select a portfolio that maximizes the first-order approximation of their expected indirect utility. We show that financial trade curves exist and converge to some second-best efficient restpoint unless some miscoordination stops the dynamics at some inefficient, but locally unstable point.

Suggested Citation

  • Gaël Giraud, 2007. "Walrasian Non-tâtonnement with Incomplete and Imperfectly Competitive Markets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00155717, HAL.
  • Handle: RePEc:hal:cesptp:halshs-00155717
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00155717
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    Keywords

    non-tatonnement; Incomplet markets; imperfect competition; second-best efficiency; non-tatonnement.; Marchés incomplets; concurrence imparfaite; efficience de second rang;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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