Abstract
Purchase PDF (1393 K)
E-mail Article
Add to my Quick Links
Cited By in Scopus (3)
Purchase PDF (1159 K)
doi:10.1016/0167-2681(91)90050-8 
Copyright © 1991 Published by Elsevier Science B.V. All rights reserved.
Overlapping generations, intermediation, and the First Welfare Theorem*1
Available online 26 March 2002.
References and further reading may be available for this article. To view references and further reading you must purchase this article.
Abstract
The First Welfare Theorem fails to hold for standard pure exchange overlapping generations economies because no agent exploits 'the profit opportunities which can arise from mediating intertemporal trade. This paper modifies the standard economy by introducing an optimizing corporate intermediary which distributes net earnings back to consumer-shareholders. The Pareto inefficient no-trade state, which is a stationary equilibrium for the standard economy, cannot be an equilibrium for this modified ‘Brokerage Economy’ because the intermediary perceives unbounded earnings opportunities. If the intermediary seeks to maximize the minimum dividend per share distributed over time, then there is a unique Pareto efficient stationary equilibrium for the Brokerage Economy.
