New Study Shows How Perfect Foresight Equilibrium Can Transform Capital Markets
The paper shows that a perfect foresight competitive equilibrium is the same as a Fisher competitive equilibrium in a model of capital accumulation. The researchers focus on the importance of the transversality condition and assumptions about savings and expectations. They use models to study how individuals make savings decisions in ideal market conditions with perfect foresight. The economy in the study includes a consumer and sectors for production and investment. Capital goods are used for investment, not consumption, and there is no joint production.