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On equilibrium existence in infinite horizon economies

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  • Emma Moreno-García
  • Juan Pablo Torres-Martínez

Abstract

In sequential economies with finite or infinite-lived real assets in positive net supply, we introduce constraints on the amount of borrowing in terms of the market value of physical endowments. We show that, when utility functions are either unbounded and separable in states of nature or separable in commodities, these borrowing constraints not only preclude Ponzi schemes but also induce endogenous Radner bounds on short-sales. Therefore, we obtain existence of equilibrium. Moreover, equilibrium also exists when both assets are numerarie and utility functions are quasilinear in the commodity used as numerarie.

Suggested Citation

  • Emma Moreno-García & Juan Pablo Torres-Martínez, 2010. "On equilibrium existence in infinite horizon economies," Working Papers wp315, University of Chile, Department of Economics.
    • Handle: RePEc:udc:wpaper:wp315
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    2. Sebastián Cea-Echenique & Juan Pablo Torres-Martínez, 2018. "General equilibrium with endogenous trading constraints," PLOS ONE, Public Library of Science, vol. 13(9), pages 1-10, September.
    3. Iraola, Miguel A. & Sepúlveda, Fabián & Torres-Martínez, Juan Pablo, 2019. "Financial segmentation and collateralized debt in infinite-horizon economies," Journal of Mathematical Economics, Elsevier, vol. 80(C), pages 56-69.

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