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Two-period economies with price-contingent deliveries

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  • João Correia da Silva

    (CEF.UP and FEP, Universidade do Porto)

Abstract

An economy with ex ante markets for future delivery contingent on ex post spot market prices is considered. Since spot prices are publicly observed ex post, this framework bypasses the enforcement problems that may arise as a result of differential information about states of nature. Generically, the equilibria of an economy with price-contingent deliveries coincide with the equilibria of the corresponding economy with state-contingent deliveries. However, replacing state-contingent deliveries with price-contingent deliveries may generate additional equilibria and/or remove some equilibria. The perfect foresight hypothesis is crucial to avoid a severe problem of nonexistence of equilibrium.

Suggested Citation

  • João Correia da Silva, 2014. "Two-period economies with price-contingent deliveries," FEP Working Papers 529, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:529
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    More about this item

    Keywords

    General equilibrium; price-contingent deliveries; differential information;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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