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Equilibrium and arbitrage in incomplete asset markets with fixed prices

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  • Herings, P.J.J.

    (Microeconomics & Public Economics)

  • Polemarchakis, H.M.

    (Externe publicaties SBE)

Abstract

At arbitrary prices of commodities and assets, fix-price equilibria exist under weak assumptions: endowments need not satisfy an interiority condition, utility functions need only satisfy very weak monotonicity requirement, and the asset return matrix allows for redundant assets. Prices of assets may permit arbitrage. At equilibrium, though restricted through endogenously determined trading constraints, arbitrage possibilities may persist; in an example, an individual holds an arbitrage portfolio.
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Suggested Citation

  • Herings, P.J.J. & Polemarchakis, H.M., 2000. "Equilibrium and arbitrage in incomplete asset markets with fixed prices," Research Memorandum 004, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  • Handle: RePEc:unm:umamet:2000004
    DOI: 10.26481/umamet.2000004
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    Cited by:

    1. John Duggan, 2011. "Noisy Stochastic Games," RCER Working Papers 562, University of Rochester - Center for Economic Research (RCER).
    2. Babenko, R. & Talman, A.J.J., 2006. "Quantity Constrained General Equilibrium," Other publications TiSEM 393bf7c1-3045-4a3b-b3c3-5, Tilburg University, School of Economics and Management.
    3. P. Herings & Ronald Peeters, 2010. "Homotopy methods to compute equilibria in game theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 42(1), pages 119-156, January.
    4. Herings, P.J.J. & Houba, H, 2010. "The Condercet paradox revisited," Research Memorandum 009, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    5. Eilon Solan & Nicolas Vieille, 2010. "Computing uniformly optimal strategies in two-player stochastic games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 42(1), pages 237-253, January.
    6. John Duggan, 2012. "Noisy Stochastic Games," RCER Working Papers 570, University of Rochester - Center for Economic Research (RCER).
    7. Pazdera, Jaroslav & Schumacher, Johannes M. & Werker, Bas J.M., 2017. "The composite iteration algorithm for finding efficient and financially fair risk-sharing rules," Journal of Mathematical Economics, Elsevier, vol. 72(C), pages 122-133.

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    More about this item

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D60 - Microeconomics - - Welfare Economics - - - General

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