On the Equivalence of Walrasian and Non-Walrasian Equilibria in Contract Markets: The case of Complete Contracts

This paper explores two models of an economy in which contracts are exchanged. In the first version contracts are exchanged on a competitive market in which traders expectations concerning conditions that prevail within specific markets adjust until markets `clear'. In the second model contract designers compete directly against one another by offering alternate contracts. It is shown that the two models are equivalent in the sense that an allocation is supported by some equilibrium in one model if and only if there is an economy in which the allocation is supported by equilibrium in the other.