The Hart Existence Problem

General Equilibrium

Article

For Radner equilibrium, we need to assume complete asset markets. This does not require that we have a full set of "state-contingent" markets as in Arrow-Debreu, but rather only that the set of assets can "span" the entire state returns space. However, assuming this does not end all difficulties. Recall that the return of asset f in state s is equal to the payoff of asset f in state s evaluated at the spot prices in state s. The fact that returns in different states depend on different state prices can lead to some rather unpleasant consequences, as pointed out by Oliver D. Hart (1975).