The Role of the Assumptions for the Existence of a General Equilibrium
General Equilibrium Theory is the benchmark of economics, especially its results concerning the efficient allocation of resources, known as the First and Second Welfare Theorems. Yet, General Equilibrium Theory is beyond the scope of most economists. This paper is pitched as the first entry point into the theory. General Equilibrium Theory proves that at least one state of equilibrium always exists. In its most general approach, it uses fixed-point theorems to this end. This paper discusses the assumptions on individuals' behaviour and the structure of the system of exchange that guarantee that the conditions of the fixed-point theorems are satisfied. The purpose is to lay bare the role each plays in proving the existence of equilibrium and provide a clear picture of the relationship between the assumptions and the result. The discussion is presented in the simplest possible setting that captures the fundamental features of commodity exchange.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
Existence and uniqueness of quadratic and linear mean-variance equilibria in general semimartingale markets
We revisit the classical topic of quadratic and linear mean-variance equilibria with both financial and real assets. The novelty of our results is that they are the first allowing for equilibrium prices driven by general…
On the Approximate Purification of Mixed Strategies in Games with Infinite Action Sets
We consider a game in which the action set of each player is uncountable, and show that, from weak assumptions on the common prior, any mixed strategy has an approximately equivalent pure strategy. The assumption of this…
Asset Prices with Overlapping Generations and Capital Accumulation: Tirole (1985) Revisited
We revisit the classic paper of Tirole "Asset Bubbles and Overlapping Generations" (1985, Econometrica), which shows that the emergence of asset bubbles solves the capital over-accumulation problem. While Tirole's main i…
Yquilibrium: A Theory for (Non-) Convex Economies
General equilibrium, the cornerstone of modern economics and finance, rests on assumptions many markets do not meet. Spectrum auctions, electricity markets, and cap-and-trade programs for resource rights often feature no…
Existence of Equilibrium Prices: A Pedagogical Proof
Under the same assumptions made by Mas-Colell et al. (1995), I develop a short, simple, and complete proof of existence of equilibrium prices based on excess demand functions. The result is obtained by applying the Brouw…