SFB 303 Discussion Paper No. A - 217

Author: Younès, Yves
Title: Games in Incomplete Market Structures and Difficulties of Coordination through the Market
Abstract: Collective rationality "and the Core" are not, in general, strong enough as soon as the number of agents and/or markets are larger than two, i.e. when the graph of the pattern of meetings has not degree 2. The reason is that the generalization of Malinvaud lemma does not obtain in all cases. However, in this paper, one shall use restrictive assumptions in order to eliminate this problem. The scheme of this paper is the following. The first part is devoted to models without money. Assumptions of differentiability and interiority entail that the generalization of Malinvaud lemma obtains trivially. The first paragraph analyzes the general O.G.M. It is conceived as a comparison point because the pattern of meetings is not acyclic in terms of agents, but only in terms of generations. The second paragraph is devoted to the I.M.M.. In the last point, one shows quickly that the same framework encompasses the F.P.M.. In the second part, one analyzes models with money. Even if utility functions are no more strictly increasing and allocations are not interior, the generalization of Malinvaud lemma obtains. The drive of the analysis is that acyclicity of the pattern of meetings formulates a strong version of the "absence of double coincidence of wants", if there is only one desired good on each market. Even if barter is feasible, it cannot be an equilibrium because it is not rational to give a desired good against nothing to a consumer whom one does not meet again. Then directing by time the pattern of meetings, one generates liquidity constraints. Finally one argues that the analysis of market coordination failures in terms of monopolistic competition can be rationalized if one assumes that the market structure is incomplete with money playing the role of the means of exchange.
Creation-Date: January 1989
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