Gabrieli, T;
Ghosal, S;
(2013)
Non-existence of competitive equilibria with dynamically inconsistent preferences.
Economic Theory
, 52
(1)
pp. 299-313.
10.1007/s00199-011-0623-9.
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Abstract
This paper shows the robust non-existence of competitive equilibria even in a simple three period representative agent economy with dynamically inconsistent preferences. We distinguish between a sophisticated and naive representative agent. Even when underlying preferences are monotone and convex, at given prices, we show by example that the induced preference of the sophisticated representative agent over choices in first-period markets is both non-convex and satiated. Even allowing for negative prices, the market-clearing allocation is not contained in the convex hull of demand. Finally, with a naive representative agent, we show that perfect foresight is incompatible with market clearing and individual optimization at given prices.
| Type: | Article |
|---|---|
| Title: | Non-existence of competitive equilibria with dynamically inconsistent preferences |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1007/s00199-011-0623-9 |
| Publisher version: | http://dx.doi.org/10.1007/s00199-011-0623-9 |
| Language: | English |
| Additional information: | The final publication is available at Springer via http://dx.doi.org/10.1007/s00199-011-0623-9. |
| Keywords: | Dynamically inconsistent preferences; Competitive equilibrium; Existence; Satiation; Non-convexity |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > The Bartlett School of Planning |
| URI: | https://discovery.ucl.ac.uk/id/eprint/1477030 |
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