ON THE EQUIVALENCE OF WALRASIAN AND NON-WALRASIAN EQUILIBRIA CONTRACTMARKETS - THE CASE OF COMPLETE CONTRACTS

This paper explores two models of an economy in which contracts are ex changed. In the first model contracts are exchanged on a competitive m arket in which traders expectations concerning conditions that prevail within specific markets adjust until markets ''clear''. In the second model contract designers compete directly against one another by offe ring alternate contracts. It is shown that Walrasian allocations corre spond with the equilibrium allocations in the model with direct compet ition when the number of traders is made large. Furthermore, the expec tational assumptions that drive the Walrasian analysis coincide with o ff the equilibrium path conjectures in the problem with direct competi tion.