A Remark On The Supposed Equivalence Between Complete Markets And Perfect Foresight Hypothesis

The authors consider a sequential equilibrium model over two periods, during the first of which agents have perfect information and their expectations are formed as if there were complete future markets. They show that, in the second period, equilibrium prices may well be different from those expected, without any unexpected change having occurred. This result highlights a lack of correspondence between the perfect foresight hypothesis and that of complete markets. Economists unanimously recognise that current economic decisions are widely affected by expectations, among which those about the prices of commodities delivered in the future have certainly to be included.