TY - JOUR
T1 - Competitive Equilibrium with Restricted Participation: The Case of Circular Trade
AU - Fiorini, Luciana C.
AU - Maldonado, Wildredo Leiva
AU - Rodrigues Neto, Jose
PY - 2018
Y1 - 2018
N2 - In a model of competitive equilibrium with restricted participation, we prove the existence of a circular competitive equilibrium (CCE). There is a unique CCE if all coefficients of relative risk aversion are bounded above by 1. The direction of trade is determined by the product of the marginal rates of substitution calculated at initial endowments. We also propose a measure for the trade volume (for each individual and for the entire market), prove a no-trade result, and calculate wealth and belief effects on the circular trade economy.
AB - In a model of competitive equilibrium with restricted participation, we prove the existence of a circular competitive equilibrium (CCE). There is a unique CCE if all coefficients of relative risk aversion are bounded above by 1. The direction of trade is determined by the product of the marginal rates of substitution calculated at initial endowments. We also propose a measure for the trade volume (for each individual and for the entire market), prove a no-trade result, and calculate wealth and belief effects on the circular trade economy.
U2 - 10.1628/093245617X15096094637995
DO - 10.1628/093245617X15096094637995
M3 - Article
VL - 174
SP - 514
EP - 547
JO - Journal of Institutional and Theoretical Economics
JF - Journal of Institutional and Theoretical Economics
IS - 3
ER -