No-arbitrage equilibria with differential information : an enlarged existence theorem
On the example of a pure-exchange financial economy with two periods, incomplete nominal-asset markets and differential information of the adverse selection's type, Cornet-De Boisdeffre (2002) introduced refined concepts of no-arbitrage prices and equilibria, which extended to the asymmetric information setting the classical concepts of the symmetric information literature. We now extend to the asymmetric information setting a standard existence property of symmetric information models. Namely, we prove that no-arbitrage prices fully characterize equilibrium security prices, in the sense that each equilibrium security price is arbitrage-free and each no-arbitrage price can be embedded as a no-arbitrage equilibrium security price. This result holds under the same standard conditions whether agents have symmetric or asymmetric information.
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- Gale, D. & Mas-Colell, A., 1975. "An equilibrium existence theorem for a general model without ordered preferences," Journal of Mathematical Economics, Elsevier, vol. 2(1), pages 9-15, March.
- Monique Florenzano, 2007.
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
- Monique Florenzano, 2008. "General equilibrium," Documents de travail du Centre d'Economie de la Sorbonne b08005, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Cornet, Bernard & De Boisdeffre, Lionel, 2002. "Arbitrage and price revelation with asymmetric information and incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 38(4), pages 393-410, December.
- Gale, D. & Mas-Colell, A., 1979. "Corrections to an equilibrium existence theorem for a general model without ordered preferences," Journal of Mathematical Economics, Elsevier, vol. 6(3), pages 297-298, December.
- Bergstrom, Theodore C., 1976. "How to discard `free disposability' - at no cost," Journal of Mathematical Economics, Elsevier, vol. 3(2), pages 131-134, July. Full references (including those not matched with items on IDEAS)
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