Equilibrium with asymmetric information and restricted participation: The no-arbritrage characterization

The paper presents a pure exchange economy, where consumers may have asymmetric information, non-ordered preferences and a restricted access to purely financial markets. Under standard conditions, it shows that the two concepts of no-arbitrage price and equilibrium asset price coincide. Namely, any collection of state prices in realizable states is proved to support a sequential equilibrium. This result extends Cass (2006), De Boisdeffre (2007) and similar results of symmetric information, such as Martins-da-Rocha and Triki's (2005) or Cornet and Gopalan's (2010). Moreover, the de?nition and existence of the sequential equilibrium do not rely on Radner's (1972, 1979) rational expectation assumptions, which may be dropped