On the completeness of complete markets

Kirsten I. M. Rohde; P.J.J. Herings

doi:10.1007/s00199-007-0291-y

On the completeness of complete markets

Kirsten I. M. Rohde, P.J.J. Herings^*

^*Corresponding author for this work

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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
Externally published	Yes

Keywords

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

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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.",

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

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AU - Rohde, Kirsten I. M.

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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

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Keywords

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