General Equilibrium with Uncertain Delivery
by
João Correia-da-Silva
University of Porto. Faculty of Economics.
Coauthors: Carlos Hervés-Beloso

This paper studies general equilibrium with differential information

in which trade is made ex ante, under private and incomplete state verification.

Objects of choice are lists of bundles such that the agent has the right to receive

one of them. The ‘market’, interpreted as being composed by competitive brokers,

delivers the cheapest of the possible alternatives. Knowledge of the selection

mechanism and observation of the prevailing prices, allows agents to correctly

predict the bundle that is to be delivered in each state of nature, and thus equate

the utility of a ‘list’ with the utility of the cheapest bundle included in the list.

A small but perfectly informed agent is introduced in the economy in order to

guarantee existence of a rational expectations equilibrium.

Date received: July 26, 2006