Information structures and viable price systems

A dynamic model of capital/financial markets is developed. A surprise is a stopping time that is not foretellable. We show that if agents' preferences exhibit a kind of time complementarity, then between ex-dividend dates a viable price system can make discrete changes only at surprises. Under the same preference condition, when the information in the economy can be modeled by a Brownian motion, a viable price system is an Itô process between ex-dividend dates. The martingle characterization of a viable price system originated by Harrison and Kreps (1979) is extended to our economy. This martingale result is independent of the time complementarity of preferences alluded to above.