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i.e. : I can write a contract to buy 1 unit of good m in state of
as
the world s, and, when the true state of the world gets revealed
there will be no dispute as to whether we’re in state s or not
stu
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s
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Timing
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21 L1 12 22 LS ms is person
as
i’s endowment of good m in state of the world s
stu
and person i’s preferences are defined over LS–dimensional
ew
consumption bundles xi ≡ (x11i , xi , . . . , xi , xi , xi , . . . , xi )
21 L1 12 22 LS
s
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Ex Ante
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as
L–dimensional bundles of goods, the πsi ’s are subjective
probabilities, and the overall utility function U i maps
stu
ew
LS–dimensional contingent consumption vectors into R
s
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we can have production too : some technology set again
defined over LS–dimensional bundles
e.g. : different technologies for different states : if y ∈ Y j , then
there is at most one state s for which any yms 6= 0
or e.g. 19.B.2 in Mas–Colell, Whinston and Green, in which
inputs are used in all states of the world, but the level of output
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produced varies with the state of the world (so that input
as
decisions are made before the resolution of the uncertainty,
outputs are realized after) stu
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s
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Everything Stays the Same
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the first fundamental theorem of welfare economics holds
as
the second fundamental theorem holds — if technology and
stu
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preferences are convex (and everyone has a positive
endowment of every good in every state of the world)
and a Walrasian equilibrium must exist if preferences and
s
technology are convex
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