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Inconsequential arbitrage

Author

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  • Page, Frank H., Jr.
  • Wooders, Myrna H.
  • Monteiro, Paulo K.
Abstract
We introduce the concept of inconsequential arbitrage and, in the context of a model allowing short-sales and half-lines in indifference surfaces, we prove that inconsequential arbitrage is sufficient for existence of equilibrium. With a slightly stronger condition of local nonsatiation than required for existence of equilibrium and with a mild uniformity condition on arbitrage opportunities, we show that the existence of a pareto-optimal allocation implies inconsequential arbitrage, implying that inconsequential arbitrage is necessary and sufficient for existence of an equilibrium.
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Suggested Citation

  • Page, Frank H., Jr. & Wooders, Myrna H. & Monteiro, Paulo K., 1999. "Inconsequential arbitrage," Economic Research Papers 269332, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269332
    DOI: 10.22004/ag.econ.269332
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    References listed on IDEAS

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    1. Page Jr., Frank H. & Wooders, Myrna Holtz, 1996. "The Partnered Core of an Economy and the Partnered Competitive Equilibrium," Economics Letters, Elsevier, vol. 52(2), pages 143-152, August.
    2. Frank H. Page Jr. & (**), Myrna H. Wooders & Paulo K. Monteiro, 1999. "Arbitrage and global cones: Another counterexample," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 16(2), pages 337-346.
    3. Gale, D. & Mas-Colell, A., 1975. "An equilibrium existence theorem for a general model without ordered preferences," Journal of Mathematical Economics, Elsevier, vol. 2(1), pages 9-15, March.
    4. Donald J. Brown & Jan Werner, 1995. "Arbitrage and Existence of Equilibrium in Infinite Asset Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 101-114.
    5. Grandmont, Jean-Michel, 1993. "Temporary general equilibrium theory," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 19, pages 879-922, Elsevier.
    6. Dana, Rose-Anne & Le Van, Cuong & Magnien, Francois, 1999. "On the Different Notions of Arbitrage and Existence of Equilibrium," Journal of Economic Theory, Elsevier, vol. 87(1), pages 169-193, July.
    7. Page, F.H.Jr. & Wooders, M.H., 1994. "Arbitrage in Markets with Unbounded Short Sales: Necessary and Sufficient Conditions for Nonemptiness of the Core and Existence of Equilibrium," UFAE and IAE Working Papers 271.94, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    8. Page Jr., Frank H. & Wooders, Myrna Holtz, 1996. "A necessary and sufficient condition for the compactness of individually rational and feasible outcomes and the existence of an equilibrium," Economics Letters, Elsevier, vol. 52(2), pages 153-162, August.
    9. Chichilnisky, Graciela, 1997. "A topological invariant for competitive markets," Journal of Mathematical Economics, Elsevier, vol. 28(4), pages 445-469, November.
    10. Bergstrom, Theodore C., 1976. "How to discard `free disposability' - at no cost," Journal of Mathematical Economics, Elsevier, vol. 3(2), pages 131-134, July.
    11. PageJr., Frank H. & Wooders, Myrna H. & Monteiro, Paulo K., 2000. "Inconsequential arbitrage," Journal of Mathematical Economics, Elsevier, vol. 34(4), pages 439-469, December.
    12. Werner, Jan, 1987. "Arbitrage and the Existence of Competitive Equilibrium," Econometrica, Econometric Society, vol. 55(6), pages 1403-1418, November.
    13. Hart, Oliver D., 1974. "On the existence of equilibrium in a securities model," Journal of Economic Theory, Elsevier, vol. 9(3), pages 293-311, November.
    14. Green, Jerry R, 1973. "Temporary General Equilibrium in a Sequential Trading Model with Spot and Futures Transactions," Econometrica, Econometric Society, vol. 41(6), pages 1103-1123, November.
    15. Reny, Philip J. & Holtz Wooders, Myrna, 1996. "The Partnered Core of a Game without Side Payments," Journal of Economic Theory, Elsevier, vol. 70(2), pages 298-311, August.
    16. Hammond, Peter J., 1983. "Overlapping expectations and Hart's conditions for equilibrium in a securities model," Journal of Economic Theory, Elsevier, vol. 31(1), pages 170-175, October.
    17. Lars Tyge Nielsen, 1989. "Asset Market Equilibrium with Short-Selling," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(3), pages 467-473.
    18. Page, Frank Jr., 1987. "On equilibrium in Hart's securities exchange model," Journal of Economic Theory, Elsevier, vol. 41(2), pages 392-404, April.
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    More about this item

    Keywords

    Agricultural and Food Policy; Research Methods/ Statistical Methods;

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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