Beliefs, Portfolio Constraints, Speculation and Asset Pricing: A General Equilibrium Analysis

2018 ◽  
Author(s):  
Nam H Dau
Keyword(s):  
Asset Pricing ◽  
General Equilibrium ◽  
Equilibrium Analysis ◽  
General Equilibrium Analysis ◽  
Portfolio Constraints

scholarly journals Coarse Competitive Equilibrium and Extreme Prices

2017 ◽  
Vol 107 (1) ◽  
pp. 109-137 ◽  
Author(s):  
Faruk Gul ◽  
Wolfgang Pesendorfer ◽  
Tomasz Strzalecki
Keyword(s):  
Asset Pricing ◽  
General Equilibrium ◽  
Cognitive Ability ◽  
Competitive Equilibrium ◽  
Equilibrium Analysis ◽  
Limited Attention ◽  
General Equilibrium Analysis ◽  
Attention Memory

We introduce a notion of coarse competitive equilibrium, to study agents’ inability to tailor their consumption to prices. Our goal is to incorporate limited cognitive ability (in particular limited attention, memory, and complexity) into the analysis of competitive equilibrium. Compared to standard competitive equilibrium, our concept yields more extreme prices and, when all agents have the same endowment, riskier allocations. We provide a tractable model suitable for general equilibrium analysis as well as asset pricing. (JEL D11, D51, D91, G10)

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