Existence and structure of stochastic equilibria with intertemporal substitution

by Peter Bank and Frank Riedel

We prove existence of an Arrow-Debreu equilibrium when agents' preferences exhibit local substitution in the sense of Hindy, Huang, and Kreps (1992). Efficient allocations and supporting price functionals are identified and characterized. Under Hindy Huang Kreps preferences, equilibrium price processes are semimartingales for arbitrary endowments, but in general, they do not belong to the space suggested originally by Hindy and Huang (1992) due to an additional singular local time component. -- General Equilibrium ; Local Substitution ; Non Time Additive Utility

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Year of publication:	2000
Authors:	Bank, Peter ; Riedel, Frank
Institutions:	Sonderforschungsbereich Quantifikation und Simulation Ökonomischer Prozesse (contributor)
Publisher:	Berlin : Humboldt-Universität
Subject:	Intertemporale Entscheidung \| Intertemporal choice \| Konsumtheorie \| Consumption theory \| Stochastischer Prozess \| Stochastic process \| Substitutionseffekt \| Substitution effect \| Gleichgewichtsmodell \| Equilibrium model \| Nachfragetheorie des Haushalts \| Consumer demand theory \| Entscheidung unter Unsicherheit \| Decision under uncertainty