Risky Arbitrage, Asset Prices, and Externalities

Cuong Le Van (1) , Frank H. Page (2) , Myrna H. Wooders (3)

1 CES - Centre d'économie de la Sorbonne
2 UA - University of Alabama [Tuscaloosa]
3 Vanderbilt University [Nashville]

We introduce a no-risky-arbitrage price condition (NRAP) for asset market models allowing both unbounded short sales and externalities such as trading volume. We then demonstrate that NRAP is sufficient for the existence of competitive equilibrium in the presence ofexternalities. Moreover, we show that if all risky arbitrages are utility increasing, then NRAP characterizes competitive equilibrium in the
presence of externalities.

Mots clés: Risky Arbitrage; Competitive Equilibrium; Viable<br />Asset Prices

Domaines: Economies et finances; Analyse classique [math.CA]; Optimisation et contrôle [math.OC]

Cuong Le Van, Frank H. Page, Myrna H. Wooders. Risky Arbitrage, Asset Prices, and Externalities. Economic Theory, 2007, 33 (3), pp.475-491. ⟨10.1007/s00199-006-0151-1⟩. ⟨halshs-00102698⟩