This is an exciting project because it tackles fundamental and extremely difficult problems in economic theory. General equilibrium analysis uses the classic Arrow-Debreu framework with complete contingent markets. The contribution of this project comes from developing a more general model with real and financial markets in which the structure of markets is incomplete. The degree of incompleteness is not assumed, as it has been in past work, but determined as part of the equilibrium. Preliminary research has already yielded some surprising results. For example, a competitive stock market is shown to be an inefficient mechanism for allocating investment over time. The project derives other results about the welfare properties of different market institutions with exchange and production.
