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Competitive Equilibrium with Restricted Participation: The Case of Circular Trade

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In a model of competitive equilibrium with restricted participation, we prove the existence of a circular competitive equilibrium (CCE). There is a unique CCE if all coefficients of relative risk aversion are bounded above by 1. The direction of trade is determined by the product of the marginal rates of substitution calculated at initial endowments. We also propose a measure for the trade volume (for each individual and for the entire market), prove a no-trade result, and calculate wealth and belief effects on the circular trade economy.
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Document Type: Research Article

Publication date: 01 September 2018

This article was made available online on 04 December 2017 as a Fast Track article with title: "Competitive Equilibrium with Restricted Participation: The Case of Circular Trade".

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  • Founded as Zeitschrift für die gesamte Staatswissenschaft in 1844.

    As one of the oldest journals in the field of political economy, the Journal of Institutional and Theoretical Economics (JITE) deals traditionally with the problems of economics, social policy, and their legal framework. JITE is listed in the Journal of Economic Literature, the Social Science Citation Index, the International Bibliography of the Social Sciences, and COREJ.

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    From 2013 on all accepted articles are published in an Online First version (in their final layout) to make them searchable and citable by their DOI immediately after peer review and acceptance. Once the article is published in an issue of the journal, the Online First version will be removed.

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