J. D. Geanakoplos and H. M. Polemarchakis (1986) prove the generic constrained suboptimality of equilibrium allocations in two period economies with incomplete markets. In these notes we provide a complete and detailed version of their proof with alternative arguments when needed.

J. D. Geanakoplos and H. M. Polemarchakis (1986) prove the generic constrained suboptimality of equilibrium allocations in two period economies with incomplete markets. They perturb asset prices at equilibrium when the degree of market incompleteness equals one. Since prices do not parameterize...