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Non-existence of competitive equilibria with dynamically inconsistent preferences created by Tommaso Gabrieli and Sayantan Ghosal

By: Contributor(s): Material type: TextTextSeries: Economic theory ; Volume 52, number 1Berlin: Springer, 2013Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
ISSN:
  • 09382259
Subject(s): LOC classification:
  • HB119 ECO
Online resources: Abstract: 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.
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Holdings
Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Journal Article Journal Article Main Library - Special Collections HB119 ECO (Browse shelf(Opens below)) Vol. 52, no.1 (pages 315-336) SP21038 Not for loan For in house use only

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.

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