Abstract
This paper is the first of a competitive analysis of an exchange economy where markets are open at each of an infinite sequence of dates for spot trading and unconditional futures contracting. In the absence of institutional arrangements for handling bankruptcy, the consistency (determinateness) and continuity of agent choice becomes an issue. If an agent’s probabilistic opinions (expectations) regarding prices are consistent in an appropriate sense, then choice is consistent and demand is upper hemi-continuous for important price-action histories. In the second part of this analysis [Nachman, 1980], commonness and compatibility assumptions regarding agents’ opinions imply a specific support structure of these opinions. This structure entails that for important histories at a given date individual and aggregate demand for futures contracts are bounded below by resources at the subsequent date. Existence of a sequence of temporary equilibria then follows in a routine fashion.
This research was supported by the National Science Foundation under Grant SOC75-14663 to the Georgia Institute of Technology. Typing support was given by the Graduate School of Business, Columbia University. The authors benefitted from discussions with James S. Jordan, Richard E. Kihlstrom, and Frederic B. Shipley on an earlier version of this work.
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Nachman, D.C., Kertz, R.P. (1991). Consistency and Continuity of Choice in a Sequence of Spot and Futures Markets. In: Khan, M.A., Yannelis, N.C. (eds) Equilibrium Theory in Infinite Dimensional Spaces. Studies in Economic Theory, vol 1. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-07071-0_19
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