SFB 303 Discussion Paper No. A - 220

Author: Zame, William R.
Title: Asymptotic Behavior of Asset Markets, I: Asymptotic Inefficiency
Abstract: This paper presents a model of an asset market with an infinite number of states of the world. Equilibria exist (under standard assumptions) provided that assets are denominated in a single numeraire commodity (or in units of account). For a given sequence of assets, necessary and sufficient conditions are established that the equilibria of the finite asset markets necessarily converge to an efficient allocation or to an equilibrium allocation of the underlying complete contingent claims market. The set of assets failing this condition is generic: it contains a countable intersection of dense, open sets.
Creation-Date: December 1988
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