Intermediation, Bubbles, and Pareto Efficiency in Economies with Production

Date
1991-04-01
Authors
Pingle, Mark
Tesfatsion, Leigh
Tesfatsion, Leigh
Major Professor
Advisor
Committee Member
Journal Title
Journal ISSN
Volume Title
Publisher
Altmetrics
Authors
Research Projects
Organizational Units
Economics
Organizational Unit
Journal Issue
Series
Department
Economics
Abstract

In a recent study, Tirole (1985) extends Diamond's (1965, pp. 1130-1135) well-known overlapping generations model of a private production economy by permitting consumption loans. That is, in addition to financing the capital investment of firms, the savings of one generation can be used to finance the consumption of agents in other generations whose consumption demands are in excess of their endowments. Tirole then shows that the re sulting production-consumption loan economy fails to satisfy the First Welfare Theorem. Specifically, as reviewed in Section 2, below, two stationary competitive equilibria exist for this economy: a Pareto inefficient equilibrium e with no consumption loans; and a Pareto efficient "golden-rule" equihbrium e" in which consumption loans are made...

Comments
Description
Keywords
Citation
DOI
Source
Collections