I've read several texts stating that with a complete market assumption, there's always a representative agent lurking. How is it that by assuming complete markets, we're able to prove the existence of a representative agent?

What's the connection between both?

Any help would be appreciated.

  • $\begingroup$ do you mean like the representative firm and representative consumer in classic macroeconomic models? $\endgroup$
    – EconJohn
    Nov 12, 2017 at 4:27
  • $\begingroup$ @EconJohn yes, I do. $\endgroup$ Nov 12, 2017 at 8:07

1 Answer 1


It depends on what you want from a representative agent. What you get is a representative agent at the given prices. For any two commodities, you have relative prices. This is where market completeness comes in. All you have to do now is find a well-behaved utility function whose marginal rate of substitution between the commodities corresponds to the relative prices. You can even take the utility function to be linear: $$u(x_1,x_2,\ldots,x_l)=\sum_{i=1}^l x_i/p_i.$$ Of course, the resulting "representative agent" is utterly useless for any comparative statics exercise or any welfare analysis.


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