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Arrow's equivalency theorem in a model with neoclassical firms

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  • Svetlana Boyarchenko

Abstract

In this paper we consider a two-period general equilibrium model with uncertainty and real assets as financial instruments. The novelty of the analysis is that real assets are the stocks of neoclassical firms, so that both returns and yields depend on anticipated spot goods prices (and, of course, the yield matrix may change rank with prices). Assuming that financial markets are potentially complete, we establish generic existence of financial equilibrium and prove that there exists a dense set of economies such that financial equilibria are efficient. Copyright Springer-Verlag Berlin/Heidelberg 2004

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  • Svetlana Boyarchenko, 2004. "Arrow's equivalency theorem in a model with neoclassical firms," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(4), pages 739-775, May.
    • Handle: RePEc:spr:joecth:v:23:y:2004:i:4:p:739-775
    DOI: 10.1007/s00199-003-0393-0
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    Cited by:

    1. Alberto Bisin & Gian Luca Clementi & Piero Gottardi, 2014. "Capital Structure and Hedging Demand with Incomplete Markets," NBER Working Papers 20345, National Bureau of Economic Research, Inc.
    2. Guido Ruta & Piero Gottardi, 2009. "Equilibrium corporate finance," 2009 Meeting Papers 149, Society for Economic Dynamics.
    3. Zierhut, Michael, 2019. "Nonexistence of constrained efficient production plans," Journal of Mathematical Economics, Elsevier, vol. 83(C), pages 127-136.
    4. Bisin, Alberto; & Gottardi, Piero; & Ruta, Guido, 2014. "Equilibrium corporate finance and intermediation," Economics Working Papers ECO2014/09, European University Institute.

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