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| Author: | Brown, D. DeMarzo, P. Eaves, B. |
| Title: | Computing equilibria when asset markets are incomplete |
| Journal: | Econometrica
1996 : JAN, VOL. 64:1, p. 1-27 |
| Index terms: | ECONOMETRICS ASSETS MARKETS |
| Language: | eng |
| Abstract: | Existence of equilibrium with incomplete markets is problematic because demand functions are typically not continuous. Discontinuities occur at prices for which a marketed asset suddenly becomes redundant. The authors show that this discontinuity disappears if we allow an agent in the economy to introduce a new asset when such redundancies occur. This enables us to prove existence with incomplete markets using a standard path-following argument. Hence, available algorithms for path-following in Rk can be applied to compute equilibria in the GEI case. |
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