Approximate equilibrium in pure strategies for a two-stage game of asset creation |
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Authors: | Marta Faias |
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Institution: | (1) Departamento de Matemática, Faculdade de Ciências e Tecnologia, Universidade Nova de Lisboa, Quinta da Torre, 2829-516 Caparica, Portugal |
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Abstract: | The paper studies a two-stage economy where consumers choose first the asset structure and then use it in a standard general
equilibrium framework to transfer wealth across time and states of nature. The financial structure is chosen by maximizing
indirect utility functions, using continuous random selections from the second-stage equilibrium correspondence. We depart
from Bisin (J Econ Theory 82:19–45, 1998) where an endogenous beliefs approach was used and the asset creation was left to
financial intermediaries. Moreover, our approach allows us to go beyond a mixed strategies result as we obtain an approximate
equilibrium in pure strategies for the economy with incomplete information about future endowments. |
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Keywords: | Endogenous asset creation Asset design game Continuous random selections Purification of equilibria |
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