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Competitive Equilibria With Incomplete Markets and Endogenous Bankruptcy

Sabarwal, Tarun
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Abstract
This paper constructs a model of an exchange economy in which bankruptcy arises in a manner similar to what we observe. Compared to related models, this model is a more realistic representation of some markets in which intertemporal assets are traded. Using standard and natural assumptions, it is shown that every economy represented by this model has an equilibrium. Therefore,bankruptcy can co-exist with smoothly functioning competitive markets in fairly general economies. Examples highlight some welfare effects of bankruptcy.
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This is the publisher's version, also available electronically from http://dx.doi.org/ 10.2202/1534-5971.1060.
Date
2003
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Publisher
Walter de Gruyter
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Economics Scholarly Works
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Sabarwal_Competitive_2003.pdf
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Keywords
Bankruptcy, General equilibrium, Incomplete markets, Exemption, Credit limit
Citation
Sabarwal, Tarun (2003): “Competitive Equilibria with Incomplete Markets and Endogenous Bankruptcy,” Contributions to Theoretical Economics, 3(1), Jan., Art. 1 (Lead article) http://dx.doi.org/10.2202/1534-5971.1060
URI
https://hdl.handle.net/1808/8815
DOI
10.2202/1534-5971.1060
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