General Equilibrium and Market Incompleteness: A Conceptual Re-Evaluation for Frontier Economies

Abstract

General Equilibrium (GE) theory provides a foundational framework for understanding how decentralized markets coordinate resource allocation. Yet the classical Arrow-Debreu model and its associated welfare theorems rely on assumptions of complete markets, perfect information, and strong institutions that rarely hold in frontier economies. This paper re-examines GE theory through the lens of market incompleteness and institutional fragility, showing that the predictive and normative power of GE becomes significantly weakened under frontier market conditions. Drawing on literature from incomplete markets theory, sequential equilibria, and institutional economics, the paper demonstrates that missing financial markets, contracting failures, and information asymmetries generate constrained inefficiencies and fragile equilibria that deviate markedly from Walrasian predictions