On the completeness of complete markets

P. Jean-Jacques Herings; Kirsten I. M. Rohde

doi:10.1007/s00199-007-0291-y

On the completeness of complete markets

P. Jean-Jacques Herings^*, Kirsten I. M. Rohde

^*Corresponding author for this work

Econometrics and Operations Research

Research output: Contribution to journal › Article › Scientific › peer-review

Abstract

We reconsider the allocational invariance of equilibria to different formulations of market completeness. We identify the so-far neglected assumption of sophisticated behavior as being crucial. First, the Arrow-Debreu setting is considered, where markets do not reopen in the future. Second, sequentially complete markets are analyzed, where goods on the spot markets and all contingent one-period ahead commodities can be traded in every state. Finally, complete markets are analyzed, where all possible contingent commodities can be traded at every state. Preferences may be time-consistent or time-inconsistent. A distinction is made between naive and sophisticated behavior.

Original language	English
Pages (from-to)	171-201
Number of pages	31
Journal	Economic Theory
Volume	37
Issue number	2
DOIs	https://doi.org/10.1007/s00199-007-0291-y
Publication status	Published - Nov 2008

Keywords

time-inconsistency
competitive equilibrium
market completeness
allocational equivalence
EXPECTATIONS
PREFERENCES
EQUILIBRIUM
PLANS

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10.1007/s00199-007-0291-y

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title = "On the completeness of complete markets",

abstract = "We reconsider the allocational invariance of equilibria to different formulations of market completeness. We identify the so-far neglected assumption of sophisticated behavior as being crucial. First, the Arrow-Debreu setting is considered, where markets do not reopen in the future. Second, sequentially complete markets are analyzed, where goods on the spot markets and all contingent one-period ahead commodities can be traded in every state. Finally, complete markets are analyzed, where all possible contingent commodities can be traded at every state. Preferences may be time-consistent or time-inconsistent. A distinction is made between naive and sophisticated behavior.",

keywords = "time-inconsistency, competitive equilibrium, market completeness, allocational equivalence, EXPECTATIONS, PREFERENCES, EQUILIBRIUM, PLANS",

author = "Herings, {P. Jean-Jacques} and Rohde, {Kirsten I. M.}",

year = "2008",

month = nov,

doi = "10.1007/s00199-007-0291-y",

language = "English",

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journal = "Economic Theory",

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T1 - On the completeness of complete markets

AU - Herings, P. Jean-Jacques

AU - Rohde, Kirsten I. M.

PY - 2008/11

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N2 - We reconsider the allocational invariance of equilibria to different formulations of market completeness. We identify the so-far neglected assumption of sophisticated behavior as being crucial. First, the Arrow-Debreu setting is considered, where markets do not reopen in the future. Second, sequentially complete markets are analyzed, where goods on the spot markets and all contingent one-period ahead commodities can be traded in every state. Finally, complete markets are analyzed, where all possible contingent commodities can be traded at every state. Preferences may be time-consistent or time-inconsistent. A distinction is made between naive and sophisticated behavior.

AB - We reconsider the allocational invariance of equilibria to different formulations of market completeness. We identify the so-far neglected assumption of sophisticated behavior as being crucial. First, the Arrow-Debreu setting is considered, where markets do not reopen in the future. Second, sequentially complete markets are analyzed, where goods on the spot markets and all contingent one-period ahead commodities can be traded in every state. Finally, complete markets are analyzed, where all possible contingent commodities can be traded at every state. Preferences may be time-consistent or time-inconsistent. A distinction is made between naive and sophisticated behavior.

KW - time-inconsistency

KW - competitive equilibrium

KW - market completeness

KW - allocational equivalence

KW - EXPECTATIONS

KW - PREFERENCES

KW - EQUILIBRIUM

KW - PLANS

U2 - 10.1007/s00199-007-0291-y

DO - 10.1007/s00199-007-0291-y

M3 - Article

SN - 0938-2259

VL - 37

SP - 171

EP - 201

JO - Economic Theory

JF - Economic Theory

IS - 2

ER -

On the completeness of complete markets

Abstract

Keywords

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