International audienceWe build a general equilibrium model with endogenous borrowing constraints compatible with credit segmentation. There are personalized trading restrictions connecting prices with both portfolio constraints and consumption possibilities, a setting which has not thoroughly been addressed by the literature. Our approach is general enough to be compatible with incomplete market economies where there exist wealth-dependent and/or investment-dependent credit access, borrowing constraints precluding bankruptcy, or assets backed by physical collateral. To prove equilibrium existence, we assume that both investment on segmented assets is not required to obtain access to credit and transfers implementable in segmented markets can be super-replicated by investing in non-segmented markets. For instance, this super-replication property is satisfied if either (i) all individuals have access to borrow at a risk-free rate; or (ii) financial contracts make real promises in terms of non-perishable commodities; or (iii) promises are backed by physical collateral
We include endogenous differential information in a model with sequential trade and incomplete financial participation. Agents update information through market signals given by commodity prices and asset deliveries. Information acts over admissible strategies and consumption tastes, allowing discontinuities in preferences and choice sets. Therefore, equilibrium may cease to exist. However, internalizing the compatibility between information and consumption through preferences, and without requiring either financial survival assumptions or fully revealing prices, equilibrium existence can be ensured. We would like to thank Jean-Marc Bonnisseau, Bernard Cornet, and João Correia-da-Silva for helpful discussions. We specially thank the detailed comments and suggestions of an anonymous referee. S. Cea-Echenique acknowledges financial support from Conicyt and University of Chile; C. Hervés-Beloso acknowledges financial support from Research Grants ECO2012-38860-C02-02 (Ministerio de Economia y Competitividad) and RGEA (Xunta de Galicia and FEDER); J. P. Torres-Martínez acknowledges financial support from Conicyt through Fondecyt Projects 1120294 and 1150207.
In a competitive model where agents are subject to endogenous trading constraints, we make the access to financial trade dependent on prices and consumption decisions. Our framework is compatible with the existence of both credit market segmentation and market exclusion. In this context, we show equilibrium existence in two scenarios. In the first one, individuals can fully hedge the payments of segmented financial contracts by trading unsegmented assets. In the second one, it is assumed that agents may compensate with increments in present demand the losses of well-being generated by reductions of future consumption.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.