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Credit Market Segmentation, Essentiality of Commodities, and Supermodularity
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Credit Market Segmentation, Essentiality of Commodities, and Supermodularity

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  • Marta Faias
  • Juan Pablo Torres-Martinez

Abstract

We consider incomplete market economies where agents are subject to price-dependent trading constraints compatible with credit market segmentation. Equilibrium existence is guaranteed when either commodities are essential, i.e, indifference curves through individuals' endowments do not intersect the boundary of the consumption set, or utility functions are concave and supermodular. Since we do not require the smoothness of mappings representing preferences, financial promises, or trading constraints, our approach is compatible with the existence of ambiguity-adverse agents, non-recourse collateralized loans, or income-dependent thresholds determining the access to credit.

Suggested Citation

  • Marta Faias & Juan Pablo Torres-Martinez, 2016. "Credit Market Segmentation, Essentiality of Commodities, and Supermodularity," Working Papers wp420, University of Chile, Department of Economics.
    • Handle: RePEc:udc:wpaper:wp420
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