Publication Type

Journal Article

Version

submittedVersion

Publication Date

1-2023

Abstract

Do price forecasts of rational economic agents need to coincide in perfectly competitive complete markets? To address this question, we define an efficient temporary equilibrium (ETE) within the framework of a two period economy. Although an ETE allocation is intertemporally efficient and is obtained by perfect competition, it can arise without the agents forecasts being completely coordinated on a perfect foresight price. Nevertheless, it entails price forecasts delicately related with each other: we show that regardless of the number of agents, there is a one dimensional set of such Pareto efficient allocations for generic endowments.

Keywords

General equilibrium, Efficient temporary equilibrium, Endogenous price forecasts, Indeterminacy

Discipline

Economic Theory

Research Areas

Economic Theory

Publication

Journal of Economic Theory

Volume

207

First Page

1

Last Page

29

ISSN

0022-0531

Identifier

10.1016/j.jet.2022.105592

Publisher

Elsevier

Copyright Owner and License

Authors

Comments

An earlier version of this paper was circulated as Working Papers on Central Bank Communication 016, University of Tokyo, Graduate School of Economics. It was presented as an invited lecture at the Asian Meeting of the Econometric Society 2019.

Additional URL

https://doi.org/10.1016/j.jet.2022.105592

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