EXISTENCE OF EQUILIBRIA WITH INCOMPLETE MARKETS - THE CASE OF SMOOTH RETURNS

The aim of this paper is to study a two-period incomplete market general equilibrium model with yields depending regularly on spot price. As the asset space is big, so are its exeptional sets and we will carefully exhibit a generic class of 'good' asset structures for which an equilibrium exists for generic endowments. This class of asset structure formalises the idea that asset structures for which there is a robust existence problem (cf. Ku and Polemarchakis (1990)), have 'sticky' critical prices.