Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
IDEAS home Printed from https://ideas.repec.org/a/eee/mateco/v19y1990i1-2p153-165.html
   My bibliography  Save this article

Observability and optimality

Author

Listed:
  • Geanakoplos, J. D.
  • Polemarchakis, H. M.

Abstract

Observability of an individual's excess demand function for assets and commodities as all prices and revenue vary suffices in order to recover his von Neumann-Morgenstern utility function. This is generically the case, even when the asset market is incomplete and the cardinal utility indices state dependent, as long as there are at least two commodities traded in spot markets at each state of nature. On the contrary, if the response of individuals' excess demand for assets as prices in spot commodity markets vary is not observable, recoverability fails when the asset market is incomplete. In particular, it is not possible to contradict the claim that the competitive allocation is fully optimal in spite of the incompleteness of the asset market.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Geanakoplos, J. D. & Polemarchakis, H. M., 1990. "Observability and optimality," Journal of Mathematical Economics, Elsevier, vol. 19(1-2), pages 153-165.
    • Handle: RePEc:eee:mateco:v:19:y:1990:i:1-2:p:153-165
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0304-4068(90)90040-G
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philip Dybvig & Heraklis Polemarchakis, 1981. "Recovering Cardinal Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(1), pages 159-166.
    2. Mas-Colell, Andreu, 1977. "The Recoverability of Consumers' Preferences from Market Demand Behavior," Econometrica, Econometric Society, vol. 45(6), pages 1409-1430, September.
    3. John Geanakoplos & Heracles M. Polemarchakis, 1985. "Existence, Regularity, and Constrained Suboptimality of Competitive Allocations When the Asset Market Is Incomplete," Cowles Foundation Discussion Papers 764, Cowles Foundation for Research in Economics, Yale University.
    4. McLennan, Andrew, 1979. "Examples of Von Neumann-Morgenstern utility functions not recoverable from asset demands," Economics Letters, Elsevier, vol. 3(2), pages 149-152.
    5. Hart, Oliver D., 1975. "On the optimality of equilibrium when the market structure is incomplete," Journal of Economic Theory, Elsevier, vol. 11(3), pages 418-443, December.
    6. David M. G. Newbery & Joseph E. Stiglitz, 1984. "Pareto Inferior Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 1-12.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Geanakoplos, John & Polemarchakis, H.M., 2008. "Pareto improving taxes," Journal of Mathematical Economics, Elsevier, vol. 44(7-8), pages 682-696, July.
    2. Charles P. Thomas, 1995. "The Role of Fiscal Policy in an Incomplete Markets Framework," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(3), pages 449-468.
    3. Andrés Carvajal & Alvaro Riascos, 2004. "Global identification from the equilibrium manifold under incomplete markets," Royal Holloway, University of London: Discussion Papers in Economics 04/30, Department of Economics, Royal Holloway University of London, revised Nov 2004.
    4. P. Herings & Herakles Polemarchakis, 2005. "Pareto improving price regulation when the asset market is incomplete," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(1), pages 135-154, January.
    5. P. Jean-Jacques Herings & Herakles Polemarchakis, 2006. "Pareto Improving Price Regulation when the Asset Market is Incomplete," Studies in Economic Theory, in: Christian Schultz & Karl Vind (ed.), Institutions, Equilibria and Efficiency, chapter 12, pages 225-244, Springer.
    6. Tirelli, Mario, 2006. "The evaluation of public investments under uncertainty," Research in Economics, Elsevier, vol. 60(4), pages 188-198, December.
    7. Carvajal, Andres & Ray, Indrajit & Snyder, Susan, 2004. "Equilibrium behavior in markets and games: testable restrictions and identification," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 1-40, February.
    8. Marek Weretka, 2019. "Normative inference in efficient markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(4), pages 787-810, November.
    9. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, August.
    10. Herakles Polemarchakis, 2015. "Markets and Efficiency," The Japanese Economic Review, Japanese Economic Association, vol. 66(2), pages 150-166, June.
    11. Kubler, F. & Chiappori, P. -A. & Ekeland, I. & Polemarchakis, H. M., 2002. "The Identification of Preferences from Equilibrium Prices under Uncertainty," Journal of Economic Theory, Elsevier, vol. 102(2), pages 403-420, February.
    12. Kübler, F. & Polemarchakis, H., 2024. "Identification in general equilibrium," Journal of Mathematical Economics, Elsevier, vol. 113(C).
    13. Wettstein, David, 1995. "Incentives and competitive allocations in exchange economies with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 24(3), pages 201-216.
    14. KÜBLER, Felix & POLEMARCHAKIS, Heracles, 1999. "The identification of preferences from the equilibrium prices of commodities and assets," LIDAM Discussion Papers CORE 1999033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    15. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kubler, F. & Chiappori, P. -A. & Ekeland, I. & Polemarchakis, H. M., 2002. "The Identification of Preferences from Equilibrium Prices under Uncertainty," Journal of Economic Theory, Elsevier, vol. 102(2), pages 403-420, February.
    2. Markus K. Brunnermeier & Yuliy Sannikov, 2015. "International Credit Flows and Pecuniary Externalities," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(1), pages 297-338, January.
    3. P. Jean-Jacques Herings & Herakles Polemarchakis, 2006. "Pareto Improving Price Regulation when the Asset Market is Incomplete," Studies in Economic Theory, in: Christian Schultz & Karl Vind (ed.), Institutions, Equilibria and Efficiency, chapter 12, pages 225-244, Springer.
    4. Donald Lien & James Quirk, 2002. "Measuring the Benefits from Futures Markets: Conceptual Issues," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 1(1), pages 53-58, April.
    5. KÜBLER, Felix & POLEMARCHAKIS, Heracles, 1999. "The identification of preferences from the equilibrium prices of commodities and assets," LIDAM Discussion Papers CORE 1999033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Kubler, Felix & Selden, Larry & Wei, Xiao, 2020. "Incomplete market demand tests for Kreps-Porteus-Selden preferences," Journal of Economic Theory, Elsevier, vol. 185(C).
    7. Dimitrios Tsomocos, 2003. "Equilibrium analysis, banking, contagion and financial fragility," FMG Discussion Papers dp450, Financial Markets Group.
    8. Sergio Turner, 2004. "Pareto Improving Taxation in Incomplete Markets," Econometric Society 2004 Latin American Meetings 310, Econometric Society.
    9. Levine, David K., 1989. "Infinite horizon equilibrium with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 18(4), pages 357-376, September.
    10. Zierhut, Michael, 2019. "Nonexistence of constrained efficient production plans," Journal of Mathematical Economics, Elsevier, vol. 83(C), pages 127-136.
    11. Hara, Chiaki, 2011. "Pareto improvement and agenda control of sequential financial innovations," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 336-345.
    12. Anton Korinek, 2017. "Currency wars or efficient spillovers?," BIS Working Papers 615, Bank for International Settlements.
    13. Lionel de Boisdeffre, 2021. "Dropping the Cass Trick and Extending Cass' Theorem to Asymmetric Information and Restricted Participation," Post-Print halshs-03196923, HAL.
    14. Gersbach, Hans & Rochet, Jean-Charles, 2017. "Capital regulation and credit fluctuations," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 113-124.
    15. Mendolicchio, C. & Pietra, T., 2019. "A re-examination of constrained Pareto inefficiency in economies with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 80(C), pages 39-55.
    16. Anton Korinek, 2016. "Currency Wars or Efficient Spillovers? A General Theory of International Policy Cooperation," NBER Working Papers 23004, National Bureau of Economic Research, Inc.
    17. Sergio Turner & Norovsambuu Tumennasan, 2006. "Pareto Improving Monetary Policy in Incomplete Markets," Working Papers 2006-04, Brown University, Department of Economics.
    18. Mirza, Afrasiab & Stephens, Eric, 2022. "Securitization and aggregate investment efficiency," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    19. Dimitrios P. Tsomocos, 2012. "Equilibrium Analysis, Banking and Financial Instability," Chapters, in: The Challenge of Financial Stability, chapter 4, pages 61-97, Edward Elgar Publishing.
    20. Mendolicchio, C. & Pietra, T., 2016. "Endowment redistribution and Pareto improvements in GEI economies," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 181-190.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:19:y:1990:i:1-2:p:153-165. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jmateco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.