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Uniqueness of competitive equilibrium with solvency constraints under gross-substitution

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  • Bloise, Gaetano
  • Citanna, Alessandro

Abstract

Under a gross substitution assumption, we prove existence and uniqueness of competitive equilibrium for an infinite-horizon exchange economy with limited commitment and complete financial markets. Risk-sharing is limited as only a part of the private endowment can be used as collateral to secure debt. The unique equilibrium is Markovian with respect to a minimal state space consisting of exogenous shocks and Negishi’s welfare weights. We represent equilibrium dynamics via a monotone operator acting on entire wealth distribution functions. We construct a fixed point of this operator generating a lower and an upper orbit and proving coincidence of accumulation points.

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  • Bloise, Gaetano & Citanna, Alessandro, 2015. "Uniqueness of competitive equilibrium with solvency constraints under gross-substitution," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 287-295.
    • Handle: RePEc:eee:mateco:v:61:y:2015:i:c:p:287-295
    DOI: 10.1016/j.jmateco.2015.09.008
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    Cited by:

    1. Gaetano Bloise, 2020. "Unique Markov Equilibrium Under Limited Commitment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(2), pages 721-751, May.
    2. Boucekkine, Raouf & Nishimura, Kazuo & Venditti, Alain, 2015. "Introduction to financial frictions and debt constraints," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 271-275.
    3. Bloise, G. & Citanna, A., 2019. "Asset shortages, liquidity and speculative bubbles," Journal of Economic Theory, Elsevier, vol. 183(C), pages 952-990.
    4. Toda, Alexis Akira & Walsh, Kieran James, 2024. "Recent advances on uniqueness of competitive equilibrium," Journal of Mathematical Economics, Elsevier, vol. 113(C).
    5. Bar Light, 2020. "Uniqueness of equilibrium in a Bewley–Aiyagari model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(2), pages 435-450, March.

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