SFB 303 Discussion Paper No. A - 355

Author: Hens, Thorsten
Title: Stability of General Equilibria with Incomplete Markets: The Case of a Mutual Fund
Abstract: The purpose of this paper is to compare local asymptotic stability of tatonnement processes in a general equilibrium with incomplete markets (abbreviated: GEI) model. The various processes differ with respect to various market organizations. One important distinction will be whether the Walrasian auctioneer who conducts the tatonnement process quotes contingent commodity prices or asset and spot market prices. Another important difference is whether he quotes current assets prices, current spot prices and future spot prices or just current spot prices and leaves the agents' price expectations up to their minds. The comparison is done for economies which are special in the sense that all agents will be satisfied with the same mutual fund. In the GEI model the single mutual fund property guarantees that agents trade assets such that ex post spot market endowment vectors become collinear across agents.
Creation-Date: January 1992
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