IDEAS home Printed from
   My bibliography  Save this paper

The perfect foresights' assumption revisited : (I) the existence of equilibrium with multiple price expectations




Our earlier papers [2,3,4,5,6] had extended to asymmetric information the classical existence theorems of general equilibrium theory [1,7,10], under the standard assumption that agents had perfect foresights, that is they knew, ex ante, which price would prevail on each spot market. Common observation suggests, however that agents more often trade with an unprecise knowledge of future prices. We now let agents anticipate, in each random state, a set of plausible spot prices and introduce a mild condition of consistent anticipations and a related concept of "correct foresights equilibrium" along which the "true" spot prices are, ex ante, in all agents' anticipations. We prove, in a finite economy with standard assumptions, that existence of such equilibrium is still characterized by the no-arbitrage condition of finance. This result, which extends our earlier theorems, shows that private information and uncertain anticipations would not affect existence but the value of equilibrium prices and allocations.

Suggested Citation

  • Lionel de Boisdeffre, 2007. "The perfect foresights' assumption revisited : (I) the existence of equilibrium with multiple price expectations," Documents de travail du Centre d'Economie de la Sorbonne b07015, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:b07015

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr & Angelo Gurgel, 2014. "Trade Policy and Poverty Reduction in Brazil," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 10, pages 225-253 World Scientific Publishing Co. Pte. Ltd..
    2. Mohamed Ali Marouani, 2002. "Imperfections du marché du travail et modèles d’équilibre général calculables : une revue de littérature," Working Papers DT/2002/16, DIAL (Développement, Institutions et Mondialisation).
    3. Louka T. Katseli & Robert E.B. Lucas & Theodora Xenogiani, 2006. "Effects of Migration on Sending Countries: What Do We Know?," OECD Development Centre Working Papers 250, OECD Publishing.
    4. Stephen Drinkwater & Paul Levine & Emanuela Lotti & Joseph Pearlman, 2003. "The Economic Impact of Migration: A Survey," School of Economics Discussion Papers 0103, School of Economics, University of Surrey.
    5. David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
    6. Beine, Michel & Docquier, Frederic & Rapoport, Hillel, 2001. "Brain drain and economic growth: theory and evidence," Journal of Development Economics, Elsevier, vol. 64(1), pages 275-289, February.
    7. Agenor, Pierre-Richard & Aynaoui, Karim El, 2003. "Labor market policies and unemployment in Morocco : a quantitative analysis," Policy Research Working Paper Series 3091, The World Bank.
    8. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, March.
    9. Lluch, Constantino, 1973. "The extended linear expenditure system," European Economic Review, Elsevier, vol. 4(1), pages 21-32, April.
    10. Chan, Nguyen & Dung, Tran Kim & Ghosh, Madanmohan & Whalley, John, 2005. "Adjustment costs in labour markets and the distributional effects of trade liberalization: Analytics and calculations for Vietnam," Journal of Policy Modeling, Elsevier, vol. 27(9), pages 1009-1024, December.
    11. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-467, June.
    12. Lucas, Robert E B, 1987. "Emigration to South Africa's Mines," American Economic Review, American Economic Association, vol. 77(3), pages 313-330, June.
    Full references (including those not matched with items on IDEAS)

    More about this item


    General equilibrium; incomplete markets; asymmetric information; arbitrage; existence of equilibrium.;

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mse:cesdoc:b07015. 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: (Lucie Label) or (Joanne Lustig). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.