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Existence and efficiency of equilibrium in infinite economies with finite aggregate wealth

Author

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  • Yasar N. Barut

    (Department of Economics, Rice University, Houston, TX 77005, USA)

Abstract

We prove the existence and efficiency of equilibrium in economies with infinitely many consumers in which there are finitely many agents who own a positive portion of the aggregate endowment. We prove existence for commodity spaces which are employed in the general equilibrium asset pricing models and use incomplete and intransitive preferences. We discuss the importance of existence of finitely many agents who own a positive portion of the aggregate endowment in obtaining efficient equilibrium. For general equilibrium asset pricing applications we require forward properness only at individually rational Pareto optimal allocations. We provide an Arrow-Debreu model for these economies. We also give an application of our approach and results by employing Stochastic Differential Utility as the utility of each consumer in an infinite horizon model.

Suggested Citation

  • Yasar N. Barut, 2000. "Existence and efficiency of equilibrium in infinite economies with finite aggregate wealth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(2), pages 319-337.
    • Handle: RePEc:spr:joecth:v:15:y:2000:i:2:p:319-337
    Note: Received: October 3, 1997; revised version: December 28, 1998
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    More about this item

    Keywords

    Existence of competitive equilibrium; Efficiency; Infinite economies; Price Bubbles; Stochastic Differential Utility.;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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