Dynamic equilibrium in a multi-agent economy : construction and uniqueness

We study an economy with several agents, who receive endowment streams denominated in units of a certain commodity over a finite horizon. The agents can consume the commodity, and they can also trade it at a certain "spot price" >/>; the proceeds of these transactions can be invested in financial assets, whose prices are modelled by continuous semimartingales. The objective of each agent is to choose a consumption/investment strategy that will maximize his expected utility from consumption and allow him to post a nonnegative wealth at the terminal time. We provide explicit information about the optimal strategies of the individual agents when the price \p is given. We also show how to determine \f* according to the law of "supply and demand", which mandates that the commodity be consumed entirely as it enters the economy and that the net demand for each financial asset be zero. University Libraries Jarnegie Mellon University Pittsburgh, PA 15213-3890 Research supported by the National Science Foundation under grant DMS-87-23078. Research supported by the National Science Foundation under grant DMS-84-03166.