SFB 303 Discussion Paper No. A - 353

Author: Hens, Thorsten
Title: Structure of General Equilibrium Models with Incomplete Markets and a Single Consumption Good
Abstract: The topic of this paper ist to analyze the structure of a Finance Model from a General Equilibrium point of view. With complete financial markets the model is formally equivalent to the contingent markets Arrow - Debreu General Equilibrium Model. However with incomplete markets, in general, one looses Walras Law, Boundary Behaviour and Continuity of the Market Excess Demand Function. We therefore impose impose assumptions which are stronger than those in the Arrow - Debreu setting but weaker than those usually used in the incomplete markets literature to prove Existence of equilibria. The main point of this paper is to show that besides being generically regular, the market excess demand function can, in general, have any structure. Finally, we make the point that although being allocational equivalent, the complete markets Finance Model and the contingent markets model differ with respect to local asymptotic stability of equilibria.
Creation-Date: December 1991
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