Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Nov, 1985, Volume 53, Issue 6

Implementing Arrow-Debreu Equilibria by Continuous Trading of Few Long-Lived Securities

https://www.jstor.org/stable/1913211
p. 1337-1356

Chi-Fu Huang, Darrell Duffie

A two-period (0 and T) Arrow-Debreu economy is set up with a general model of uncertainty. We suppose that an equilibrium exists for this economy. The Arrow-Debreu economy is placed in a Radner (dynamic) setting; agents may trade claims at any time during [O, T]. Under appropriate conditions it is possible to implement the original Arrow-Debreu equilibrium, which may have a infinite-dimensional commodity space, in a Radner equilibrium, which only a finite number of securities. This is done by opening the "right" set of security markets, a set which effectively completes markets for the Radner economy.


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