Publication Type
Working Paper
Version
publishedVersion
Publication Date
12-2012
Abstract
We define a solution concept, perfectly contracted equilibrium, for an intertemporal exchange economy where agents are simultaneously price takers in spot commodity markets while engaging inefficient, non-Walrasian contracting over future prices. Without requiring that agents have perfect foresight, we show that perfectly contracted equilibrium outcomes are a subset of Pareto optimal allocations. It is a robust possibility for perfectly contracted equilibrium outcomes to differ from Arrow-Debreu equilibrium outcomes. We show that both centralized banking and retrading with bilateral contracting can lead to perfectly contracted equilibria.
Keywords
equilibrium, future prices, uncertainty, contracts
Discipline
Economic Theory | Finance
Research Areas
Economic Theory
First Page
1
Last Page
39
Publisher
SMU Economics and Statistics Working Paper Series, No. 36-2012
City or Country
Singapore
Citation
CHATTERJI, Shurojit and GHOSAL, Sayantan.
Contracting over Prices. (2012). 1-39.
Available at: https://ink.library.smu.edu.sg/soe_research/1417
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.