Sequentially complete markets remain incomplete |
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| Authors: | Jacques H Drze P Jean-Jacques Herings |
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| Institution: | aCORE, 34 Voie du Roman Pays, B-1348 Louvain-la-Neuve, Belgium;bDepartment of Economics, Universiteit Maastricht, P.O. Box 616, 6200 MD Maastricht, The Netherlands |
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| Abstract: | We show by means of an example that the result of Arrow Arrow, K.J. (1953), Le rôle des valeurs boursières pour la répartition la meilleure des risques, Econométrie, 41–47, CNRS, Paris; translated as The role of securities in the optimal allocation of risk bearing, Review of Economic Studies, 31, 91–96] is problematic when there exist multiple equilibrium continuations to the initial-period component of an intertemporal equilibrium. |
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| Keywords: | Sequentially complete markets Rational expectations Time inconsistency |
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