A remark on the supposed equivalence between complete markets and perfect foresight hypothesis

We consider a sequential equilibrium model over two periods, during the first of which agents have perfect information and their expectations are formed as if there were complete future markets. We show that, in the second period, equilibrium prices may well be different from those expected, without any unexpected change having occurred. This result highlights a lack of correspondence between the perfect foresight hypothesis and that of complete markets.

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Year of publication:	2009-06
Authors:	Fratini, Saverio M. ; Levrero, Enrico Sergio
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	Arrow-Debreu equilibrium \| Complete markets \| Sequential equilibrium \| Perfect foresight \| Indeterminacy

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Extent:	application/pdf
Series:	MPRA Paper.
Type of publication:	Book / Working Paper
Classification:	D46 - Value Theory ; D84 - Expectations; Speculations ; D51 - Exchange and Production Economies
Source:	RePEc - Research Papers in Economics

Persistent link: https://ebvufind01.dmz1.zbw.eu/10005035005