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
Citation
CHATTERJI, Shurojit and KAJII, Atsushi.
Decentralizability of efficient allocations with heterogenous forecasts. (2023). Journal of Economic Theory. 207, 1-29.
Available at: https://ink.library.smu.edu.sg/soe_research/2428
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.
Additional URL
https://doi.org/10.1016/j.jet.2022.105592
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.