Computing equilibria when asset markets are incomplete.
Existence of equilibrium with incomplete markets is problematic because demand functions are typically not continuous. Discontinuities occur at prices for which a marketed asset suddenly becomes redundant. We show that this discontinuity disappears if we allow an agent in the economy to introduce a...
| Publicado en: | Econometrica Vol. 64; pp. 1 - 28 |
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| Autores principales: | , , |
| Formato: | Artículo |
| Publicado: |
Wiley-Blackwell
January 1996
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| Materias: | |
| Acceso en línea: | Ver este registro en EBSCOhost |
| Sumario: | Existence of equilibrium with incomplete markets is problematic because demand functions are typically not continuous. Discontinuities occur at prices for which a marketed asset suddenly becomes redundant. We show that this discontinuity disappears if we allow an agent in the economy to introduce a new asset when such redundancies occur. This enables us to prove existence with incomplete markets using a standard path-following argument. Hence, available algorithms for path-following in |WbR[|WB]K can be applied to compute equilibria in the GEI case. We demonstrate this by computing equilibrium for a numerical example. Reprinted by permission of the Econometric Society. |
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