My professor gives us these conditions for the existence of a Competitive Equilibrium (CE) in a pure exchange economy: $U^i$ is continuous, strictly increasing and strictly concave for all $i$ and $\omega_n > 0$ for all $n$ (where $\omega_n$ is the total endowment of good $n$).

I am trying to demonstrate these conditions but I am a bit stuck. I started using the Maximum theorem but now I cannot go ahead. Any hint?

  • 1
    $\begingroup$ Try a fixed point theorem e.g. brouwer's $\endgroup$ – BB King Feb 20 '16 at 11:05
  • $\begingroup$ What do you mean you are trying to demonstrate the conditions? Are you trying to show that $U^i$ is strictly concave? $\endgroup$ – Giskard Feb 20 '16 at 11:15
  • $\begingroup$ @denesp I am trying to show that these are the conditions for the existence of a competitive equilibrium. Thus, that $U^i$ must be strictly concave, increasing and continuous $\endgroup$ – PhDing Feb 21 '16 at 9:57
  • $\begingroup$ These are sufficient conditions for existence,not necessary conditions. Either way, the proof of sufficiency is not trivial. Look at graduate micro textbooks. $\endgroup$ – Michael Greinecker Jun 6 '16 at 3:03

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.