Economics Research Institute Study Paper
Utah State University Department of Economics
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We show that Arrow-Debreu equilibria with countably additive pnces In infinite-time economy under uncertainty can be implemented by trading infinitely-lived securities in complete sequential markets under two different portfolio feasibility constraints: wealth constraint, and essentially bounded portfolios. Sequential equilibria with no price bubbles implement Arrow-Debreu equilibria, while those with price bubbles implement Arrow-Debreu equilibria with transfers. Transfers are equal to the value of price bubbles on initial portfolio holdings. Price bubbles may arise in sequential equilibrium under the wealth constraint, but with essentially bounded portfolios.
Huang, Kevin X.D. and Werner, Jan, "Implementing Arrow-Debreu Equilibria By Trading Infinitely Lived Securities" (2000). Economic Research Institute Study Papers. Paper 197.