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The perfect foresights' assumption revisited: (I) the existence of equilibrium with multiple price expectations

Author

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  • Lionel de Boisdeffre

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Our earlier papers [2,3,4,5,6] had extended to asymmetric information the classical existence theorems of general equilibrium theory [1,7,10], under the standard assumption that agents had perfect foresights, that is they knew, ex ante, which price would prevail on each spot market. Common observation suggests, however that agents more often trade with an unprecise knowledge of future prices. We now let agents anticipate, in each random state, a set of plausible spot prices and introduce a mild condition of consistent anticipations and a related concept of "correct foresights equilibrium" along which the "true" spot prices are, ex ante, in all agents' anticipations. We prove, in a finite economy with standard assumptions, that existence of such equilibrium is still characterized by the no-arbitrage condition of finance. This result, which extends our earlier theorems, shows that private information and uncertain anticipations would not affect existence but the value of equilibrium prices and allocations.

Suggested Citation

  • Lionel de Boisdeffre, 2007. "The perfect foresights' assumption revisited: (I) the existence of equilibrium with multiple price expectations," Post-Print halshs-00145417, HAL.
    • Handle: RePEc:hal:journl:halshs-00145417
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00145417
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