Questions tagged [competitive-equilibrium]

The study of equilibrium when individual agents have no power to influence market-level variables like prices or quantities.

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Is it allowed to have a company that is not profitable?

In my old memories my teacher said that we can't have a company who are not profitable. The reason is to prevent unfair competition. Ex : Toyota sell car at 10 \$ during 2 years. Every other mark ...
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Competitive equilibrium for an economy with a consumer and a producer

A representative agent’s preference over consumption $(c)$ and labour supply $(l)$ is given by the utility function $$ u(c_D, l_S)= c_D^a .(24-l_S)^{1-a}$$ Production of the consumption good $c$ is ...
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What does it mean when an economist talks about "equilibrium"

In economics, there are many equilibrium concepts, like equilibrium under perfect competition, Monopolist equilibrium, competitive equilibrium, general equilibrium, nash equilibrium, equilibrium price,...
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Arrow debreu equilibrium or Radner equilibrium and spot prices

Suppose there are 2 states, 2 goods and 2 consumers and consumers have identical expected utility function: $U^i (x)= \sum_{s=1,2} \pi_s (\ln x_{1s}+\ln x_{2s} )$ where $\pi=(1/3,2/3)$. Endowments are ...
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Perfect Competition, Zero profit rule and General Equilibrium

I'm reading a book where the definition of an equilibrium for a competitive economy is given as in Kenneth J. Arrow; Gerard Debreu (1954) Existence of an Equilibrium for a Competitive Economy ...
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Endowment economy

Consider an economy populated by two types of infinitely lived consumers, odd and even. There is mass one of each type of consumer. There is a single good in the economy. The economy starts at $t = 0$....
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The Equilibrium Wage in Ricardian Trade Model

I am learning the Ricardian trade model by reading Eaton & Kortum 2012 JEP. The equilibrium is easy to understand when there are finite goods, as shown in their Figure 1. However, they then ...
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CES utility maximization two goods two period

In an Arrow-Debreu economy, there are two periods and N identical agents. In each period, the agent consumes two goods $c_{At}$, $c_{Bt}$ where $ t = 0,1 $ and has the endowments $(e_{a0},e_{b0},e_{a1}...
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Show that the long-run supply curve of an increasing cost industry in perfect competition is upward sloping

Many intermediate microeconomics textbooks teach us that in perfect competition, the long-run supply curve of an increasing cost industry is upward-sloping. However, They usually give some hand-waving ...
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Computing the competitive equilibrium from the edgeworth box

Consider the following Edgeworth economy. There are two consumers $i \in {1,2}$ and two goods x and y. Consumer $i$ consumes $(x_i,y_i)$, where $x_i ≥0$ and $y_i ≥0$. Endowments are $ω_1 =(a,0)$ and $...
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Why is the number of firms in the short run fixed?

My textbook says that in perfect competition the condition of free entry and exit only applies to the long run equilibrium. Because in the short run no new firms can enter or old ones can leave the ...
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GE with an intermediate good

intro I'm looking at a simple model with 1 consumer, 2 goods and 2 firms. I'm trying to get a price vector [p0, p1] that makes it work. By makes it work, I mean, ...
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Walrasian Equilibrium in A Simple Assignment (Matching) Model

I am reading Acemoglu 1996 and the Walrasian allocation in section II makes me confused. The setting is following. The economy lasts for two periods and consists of two types of agents, firms and ...
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Quantity restriction in model with fixed factor of production

I'm trying to see the effect of a restriction on production in a model where one factor of production is perfectly elastic and the other is fixed. Specifically, suppose the production function is Cobb-...
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free market equilbrium point, S=D confusion

I am confused over the concept of market equilbriums. let's say there is a firm X, who supplies 100 units in 1 week and the market demand is also 100 units, then Supply = Demand, and resources are ...
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Long run equilibrium price under perfect competition

I have a problem related to Ricardian rent. I have one firm, let's call it X firm, and all of the other firms in the market. All firms have to pay some transportation costs due to their land except ...
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Leontif case for Edgeworth box

Consumer 1 has utility $u_1=min\{x_1,y_1\}$, Consumer 2 has utility $u_1=min\{x_1,2y_1\}$, their endowments are $w_1=(a,0)$ and $w_1=(b,0)$ and in this case $a=b$. I know the offer curves look like ...
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Equilibrium with substitute goods

I am attempting to solve the following problem The demand functions for two substitute goods, the production cost of which equals $c_1$ and $c_2$, are $q_1 = a_1 + b_{11}p_1 + b_{12}p_2$ and $q_2 = ...
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Calculating the Competitive Equilibrium in a pure exchange economy with 3 comodities and 2 agents [closed]

Consider a pure exchange economy with three commodities and two households with individual endowments $e_{1}=(1,2,3) \text { and } e_{2}=(3,2,1)$ respectively, and utility functions $u_{1}\left(x_{11},...
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Pareto allocations and Competitive equilibrium

Consider the one-consumer one-firm economy. The consumer has preferences over leisure $l\in(0,L)$ and consumption good $x ≥ 0$ represented by utility function $u(x, l) = ax + l$, where $a > 0$ is a ...
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How does "buy low, sell high" relate to supply and demand?

I'm taking introductory microeconomics, and I'm trying to consolidate my understanding by looking at some real world examples. In a perfectly competitive market, there are many consumers and suppliers ...
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Identical aggregation

Assume the following: all firms are identical, i.e. at each time period $t$, $\forall i$, $j: F_{t}^j = F_{t}^i = F_t$ and the technology is CRS. All consumers have the same endowment of capital $\...
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What are the best theoretical or empirical defenses of equilibrium analysis in economics?

An Anarchist FAQ (see Wikipedia page here) focuses its opposition to mainstream economics by criticizing equilibrium analysis. The FAQ notes that, [Equilibrium analysis] is essentially a static tool ...
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Short, Medium and Long-Run Profit Maximization

Suppose that, in a perfectly competitive industry, the firms' technology have the following cost function: $C(x) = 100 + 3x + 0.04x^2$. Assume the fixed costs are sunken. a) If the demand for the ...
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Lecture notes competitive labor market with minimum wage

Can somebody recommend lecture notes that derive competitive labour market model equilibrium with minimum wages? This has been surprisingly hard to find, because most lecture notes use minimum wages ...
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Competitive wages under imperfect information

Do competitive wages always have to be defined by marginal productivity? Can we have competitive wages which are not based on productivity, when the information is not perfect? To put it in context, ...
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Competitive equilibrium with IRTS

Suppose we have a static economy with one firm and one consumer. Consumer owns the firm and decides on how much to consume and to work: $$\max U(c,1-n_s)\ \text{s.t.} \ pc\leq wn_s+\pi$$ The firm is ...
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demand curve shift in a monopolistic competitive market

As more firms enter the market, the quantity demanded at a given price level will thus decline. Therefore, the perceived demand curve for any individual firm will continue to shift leftward until the ...
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preference convexity and existence of equilbria

Consider a production economy with $L$ goods, a single consumer and a single producer whose production set are given by $Y\subset R^L$. Question is to find the existence condition of equilibria of ...
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Competitive equilibrium with production

Consider an economy with four goods, two individuals and two firms. Firm 1 produces good $x$, firm 2 produces good $y$. Consumers' utilities are $u_1(x,y,z,w)=\min\{x,2y\}$ and $u_2(x,y,z,w)=\min\{2x,...
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Who is losing in an arbitrage?

When some entity takes advantage of an arbitrage opportunity, who is losing money? For example, when there are price differences across cryptocurrency exchanges and someone exploits an arbitrage ...
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why is market clearing price assumed in cournot model with homogenous products

In the cornout model two firms choose the amount of a product they wish to produce. It is assumed that the price that results is the market clearing price for the total supply. Is there a ...
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Competitive equilibirium of max utility functions

Apologies in advance if my terms aren't exact, I'm learning "Mathmatical Economoics" in the hebrew language and some of the terms don't translate well. I was given the following question: Two ...
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Externalities, Pigouvian Taxes and Wikipedia

It states on Wikipedia: A Pigovian tax (also called Pigouvian tax, after economist Arthur C. Pigou) is a tax imposed that is equal in value to the negative externality. The result is that the ...
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Heckscher-Ohlin with non homothetic preferences [duplicate]

Can someone tell me how I can show with an example that the Heckscher-Ohlin result does not necessarily hold when preferences are not homothetic. I was asked if it similar as a case in which the ...
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Heckscher-Ohlin with heterogeneous preferences

could someone really help me out I would need to show a situation in which the Heckscher-Ohlin result does not necessarily hold when preferences are heterogeneous. Does someone have an idea how I ...
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What guarantees that endowed agents have non-zero prices in an Arrow-Debreu Economy

In my research I am trying to find minimal conditions to guarantee a quasi-equilibrium must always be a typical Arrow-Debreu equilibria in a rather specific production setting. This may be rather ...
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Why is market equilibrium pareto efficient?

Let us assume that the current price $P$ is lower than the 'equilibrium price' $P^\star$ so that $Q$ is lower than $Q^\star$. If we move from this combination towards the equilibrium one, it may be ...
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Simulating a simple economy with ... price-makers? arriving at competitive equilibrium

I'm new to economics and thinking about graduate study. My background is mathematics. I started reading a book on microeconomics by Mas-Colell, Whinston and Green. My goal is to understand how ...
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Equilibrium price determination in a 2 commodity framework

Following are the set of equations describing the demand and supply of two goods X and Y: Demand functions: $$X_d = a_1 - b_1P_x + c_1P_y$$ $$Y_d = a_2 - b_2P_y +c_2P_x$$ $a_1,~ a_2,~ b_1,~ b_2,~ ...
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Why is Walras equilibrium inefficient when we are dealing with public goods?

I know that when we have public goods we have that: $$MRT = MRS_a + MRS_b$$ Though I fail to understand why does this makes Walras equilibrium inefficient. Thank you very much for your help!
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Computing the competitive equilibrium given initial allocation

Suppose that there are two agents, 1 and 2, and two goods, honey (h) and lemon (l), and that the agents' preferences over these goods are defined by the following utility functions: $$u^1(x_h^1, x_l^...
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Walrasian Equilibrium intuition given prices and some initial allocation

Suppose we have two agents who are each assigned some initial allocation of two different goods, where the prices of each good are given. Also, suppose the utility functions for each agent are weakly ...
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Selling price of a widget at competitive equilibrium

Let's suppose that it costs producers a minimum of y dollars to produce a widget (it may actually cost more, depending on the producer, but that is the bare minimum). In a competitive equilibrium, ...
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What's the market equilibrium price for the used good?

On a perfectly competitive market, a buyer wants to buy a used good. He is willing to pay $30$ for a badly used good, and $60$ for a nicely used good. The seller is willing to sell a badly used good ...
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Market price, output that maximize the price and level of firm profit after applying a license fee

I'm currently working on a problem that says the following : At first we had a number N of firms in perfectly competitive industry,the exercice gives us the total cost and the Market Demand with p as ...
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A question about the exchange economy

The question I am given is the following: Consider an economy that has only three goods, mineral water, orange juice, and wine available in fixed amounts, and three agents, A, B and C. So in this ...
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Equilibria in non regular economies

We know that in regular economies general equilibrium theory predicts a finite and odd number of equilibria, using the properties of the excess demand function and the index theorem. How about the ...
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Finding individual utility

There are N agents living in an economy with two goods, $X$ and $Y$. Their preferences are described by the following utility function $u(X,Y) = 2 \sqrt{XY}$. Each agent is endowed with 1 unit of $X$ ...
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Necessary conditions for the existence of a competitive equilibirum

I got that in an exchange economy, conditions as preferences being continuous, strictly convex and strongly monotone and $\sum_i \omega_i\gg 0$ are sufficient conditions for the existence of a ...
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