Equilibrium price dynamics in an overlapping-generations exchange economy

Abstract

An extension to the Yaari (1965)–Blanchard (1985) continuous time overlapping generations model for an endowment Arrow–Debreu economy with an age-structured population is presented. It is proved that Arrow–Debreu equilibrium prices are represented by a double linear integral equation, and depend on the age-distributions of population and endowments. For an economy with a balanced growth, and logarithmic utility, we prove that bubbles may exist if endowments are distributed earlier than some critical age.