Credit market segmentation, essentiality of commodities, and supermodularity

Marta Faias, Juan Pablo Torres-Martinez

Research output: Contribution to journalArticle

Abstract

We consider incomplete market economies where agents are subject to price-dependent trading constraints compatible with credit market segmentation. Equilibrium existence is guaranteed when either commodities are essential, i.e, indifference curves through individuals' endowments do not intersect the boundary of the consumption set, or utility functions are concave and supermodular. The smoothness of mappings representing preferences, financial promises, or trading constraints is not required. Hence, we may include in our framework economies where ambiguity is allowed and agents maximize the minimum expected utility over a set of priors, or where markets include non-recourse collateralized loans. (C) 2017 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)115-122
JournalJournal of Mathematical Economics
Volume70
DOIs
Publication statusPublished - May 2017

Keywords

  • Credit market segmentation
  • Essential commodities
  • Supermodularity

Cite this