Existence of Arrow-Radner equilibrium with endogenously complete markets under incomplete information

Authors
Citation
F. Riedel, Existence of Arrow-Radner equilibrium with endogenously complete markets under incomplete information, J ECON THEO, 97(1), 2001, pp. 109-122
Citations number
19
Categorie Soggetti
Economics
Journal title
JOURNAL OF ECONOMIC THEORY
ISSN journal
00220531 → ACNP
Volume
97
Issue
1
Year of publication
2001
Pages
109 - 122
Database
ISI
SICI code
0022-0531(200103)97:1<109:EOAEWE>2.0.ZU;2-U
Abstract
A stochastic pure exchange economy with incomplete information is studied w here one risky asset and a locally riskless bond are traded. The underlying risks are described by a k-dimensional Brownian motion with k greater than or equal to 2. The Brownian morion is nor directly observable. Agents obse rve only asset prices and dividends. Existence of an Arrow-Radner equilibri um is established. In such on equilibrium. asset prices result such that ev ery informationally feasible consumption plan can be financed by trading in the risky asset and the bond. In this sense, the resulting asset market is complete. (C) 2001 Academic Press.