Stochastic Production-Exchange Equilibria

This paper examines the role of production and stock markets in a continuous-time stochastic economy. The results include sufficient conditions for the existence of general equilibria: spot price processes and security price processes under which there exist preference maximal consumption and portfolio choices for agents and share value maximizing production choices for firms that clear markets for commodities and securities at all dates and states. Specific stochastic growth and stochastic input-output production technologies satisfying the stated production conditions are illustrated. We also study traditional issues concerning the financial and production policy of the firm.