A Negishi’s Approach to Competitive Equilibrium with Risk of Default

Bloise, Gaetano and Reichlin, Pietro and Tirelli, Mario (2010) A Negishi’s Approach to Competitive Equilibrium with Risk of Default. [Working Paper]. p. 35. (Unpublished)

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We study competitive equilibrium in sequential economies under limited commitment. Default induces permanent exclusion from nancial markets and endogenously determined solvency constraints prevent debt repudiation. We establish Welfare Theorems under a weaker notion of constrained efficiency, inspired by Malinvaud, corresponding to the absence of welfare improving feasible redistributions over nite (though indenite) horizons. A Negishi's Method permits to show that, for any arbitrary value of social welfare in between autarchy and constrained optimality, there exists an equilibrium attaining that value. This method is also exploited to verify equilibrium indeterminacy.

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; Negishi's Method; indeterminacy; market collapse.
MIUR Scientific Area: Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited by: Maria Teresa Nisticò
Date Deposited: 17 Dec 2010 14:50
Last Modified: 21 Apr 2015 23:14
URI: http://eprints.luiss.it/id/eprint/856


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