Stochastic equilibria for economies under uncertainty with intertemporal substitution
Martins-da-Rocha, Victor-Filipe; Riedel, Frank (2006), Stochastic equilibria for economies under uncertainty with intertemporal substitution, Annals of Finance, 2, 1, p. 101-122. 10.1007/s10436-005-0025-8
TypeArticle accepté pour publication ou publié
Journal nameAnnals of Finance
MetadataShow full item record
CEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
Abstract (EN)We consider the model of a stochastic pure exchange economy with a finite set of agents whose preferences exhibit local substitution in the sense of Hindy and Huang (1992). In order to prove the existence of Arrow–Debreu equilibria, it is assumed in Bank and Riedel (2001) that smooth subgradients exist (Assumption 1 in Bank and Riedel (2001)) and that they are uniformly bounded from above and away from zero (Assumption 2 in Bank and Riedel 2001).In this paper, we prove that the existence of smooth subgradients implies local properness of preferences. By a slight improvement of classical existence results of the literature, we prove that the local properness of preferences is a sufficient condition for the existence of equilibria, rendering Assumption 2 in Bank and Riedel (2001) superfluous.
Subjects / KeywordsStochastic pure exchange economies; Intertemporal substitutability of consumption; Arrow–Debreu equilibrium; Local properness; Optional random measures
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