On the completeness of complete markets

Herings, Jean-Jacques;Rohde, Kirsten I.M.
(2008) Economic Theory — Vol. 37, n° 2, p. 171-201 (2008)

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  • Herings, Jean-JacquesUniversiteit Maastricht
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  • Rohde, Kirsten I.M.
    Author
Abstract
We reconsider the allocational invariance of equilibria to different formulations of market completeness. We identify the so-far neglected assumption of sophisticated behavior as being crucial. First, the Arrow-Debreu setting is considered, where markets do not reopen in the future. Second, sequentially complete markets are analyzed, where goods on the spot markets and all contingent one-period ahead commodities can be traded in every state. Finally, complete markets are analyzed, where all possible contingent commodities can be traded at every state. Preferences may be time-consistent or time-inconsistent. A distinction is made between naïve and sophisticated behavior.
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Herings, J.-J., & Rohde, K. I. M. (2008). On the completeness of complete markets. Economic Theory, 37(2), 171-201. https://doi.org/10.1007/s00199-007-0291-y (Original work published 2008)