Inconsequential arbitrage (Q1592521)

The paper deals with the concept of arbitrage, namely with the one of inconsequential arbitrage, in the framework of a model with short-sales and half-lines in indifference surfaces. It is shown that under certain conditions the inconsequential arbitrage, the existence of a Pareto optimal allocation, and compactness of the set of utility possibilities are equivalent. It is also shown under which conditions the inconsequential arbitrage is necessary and sufficient for the existence of an equilibrium. The concept and properties of the inconsequential arbitrage are compared to the conditions limiting the arbitrage known from the previous literature referred to in the paper.