Accessibility navigation


Non-existence of competitive equilibria with dynamically inconsistent preferences

Gabrieli, T. and Ghosal, S. (2013) Non-existence of competitive equilibria with dynamically inconsistent preferences. Economic Theory, 52 (1). pp. 299-313. ISSN 1432-0479

Full text not archived in this repository.

To link to this article DOI: 10.1007/s00199-011-0623-9

Abstract/Summary

This paper shows the robust non-existence of competitive equilibria even in a simple three period representative agent economy with dynamically inconsistent preferences. We distinguish between a sophisticated and naive representative agent. Even when underlying preferences are monotone and convex, at given prices, we show by example that the induced preference of the sophisticated representative agent over choices in first-period markets is both non-convex and satiated. Even allowing for negative prices, the market-clearing allocation is not contained in the convex hull of demand. Finally, with a naive representative agent, we show that perfect foresight is incompatible with market clearing and individual optimization at given prices.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > Real Estate and Planning
ID Code:28051
Publisher:Springer

Centaur Editors: Update this record

Page navigation