<p>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.</p>

CC BY-SA 3.0
2017-11-12T22:20:43.603Z
2017-11-12T22:20:43.603Z
Michael Greinecker
<p>I've read several texts stating that with a complete market assumption, there's always a representative agent <em>lurking</em>. How is it that by assuming complete markets, we're able to prove the existence of a representative agent?</p>

<p>What's the connection between both?</p>

<p>Any help would be appreciated.</p>

CC BY-SA 3.0
2017-11-12T04:27:05.247Z
do you mean like the representative firm and representative consumer in classic macroeconomic models?
EconJohn
CC BY-SA 3.0
2017-11-12T08:07:35.480Z
@EconJohn yes, I do.
An old man in the sea.
<macroeconomics><microeconomics><complete-markets><representative-agent>
How, with complete markets, do we have a representative agent?
An old man in the sea.
# How, with complete markets, do we have a representative agent?

(Asked by: username_0 on 2017-11-07)

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.

**Tags:** macroeconomics, microeconomics, complete-markets, representative-agent

> **Comments:**
> **username_1**: do you mean like the representative firm and representative consumer in classic macroeconomic models?  
> **username_0**: @username_1 yes, I do.  

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## 1 answers

### Answer by username_2 on 2017-11-12. Score: 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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