EQUILIBRIUM IN ECONOMIES WITH FINANCIAL-MARKETS - UNIQUENESS OF EXPECTATIONS AND INDETERMINACY

We consider two-period, pure exchange economies with uncertainty and c omplete or incomplete asset markets. Assets are nominal. If the number of agents and of period-zero commodities is large enough, there is a dense, residual set of economies (parametrized by utility functions) s uch that, for each pair of distinct financial equilibria, spot zero eq uilibrium prices are different. Agents, observing first-period equilib rium prices, can formulate exact forecasts on future equilibrium price s, notwithstanding the real indeterminacy of the set of financial equi libria. If the asset market is complete, the result is true for an ope n and dense set of economies. (C) 1996 Academic Press, Inc.