Indeterminacy of Competitive Equilibrium with Risk of Default
Bloise, Gaetano and Reichlin, Pietro and Tirelli, Mario (2009) Indeterminacy of Competitive Equilibrium with Risk of Default. [Working Paper]. p. 20. Departmental Working Papers of Economics (No. 0109).
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We prove indeterminacy of competitive equilibrium in sequential economies, where limited commitment requires the endogenous determination of solvency constraints preventing debt repudiation (Alvarez and Jermann ). In particular, we show that, for any arbitrary value of social welfare in between autarchy and (constrained) optimality, there exists an equilibrium attaining that value. Our method consists in restoring Welfare Theorems for a weak notion of (constrained) optimality. The latter, inspired by Malinvaud , corresponds to the absence of Pareto improving feasible redistributions over nite (though inde nite) horizons.
|Item Type:||Report / Paper (Working Paper)|
|Research documents and activity classification:||Working Papers > Non-Refereed Working Papers / of national relevance only|
|Divisions:||Department of Business and Management|
|Uncontrolled Keywords:||Limited commitment; solvency constraints; Malinvaud efficiency Welfare Theorems; indeterminacy; Welfare Theorems; indeterminacy; Welfare Theorems indeterminacy; financial fragility; market collapse.|
|MIUR Scientific Area:||Area 13 - Economics and Statistics > SECS-P/01 Political Economy|
|Deposited by:||Maria Teresa Nistico|
|Date Deposited:||17 Dec 2010 12:02|
|Last Modified:||21 Apr 2015 23:14|
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Indeterminacy of Competitive Equilibrium with Risk of Default. (deposited 28 Oct 2009 09:49)
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