Questions tagged [competitive-equilibrium]
The study of equilibrium when individual agents have no power to influence market-level variables like prices or quantities.
66
questions
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1answer
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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 ...
1
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1answer
53 views
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 ...
0
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1answer
104 views
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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1answer
31 views
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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0answers
53 views
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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0answers
29 views
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 ...
0
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1answer
105 views
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 ...
2
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0answers
44 views
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 ...
0
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0answers
38 views
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,~ ...
2
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1answer
63 views
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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2answers
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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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1answer
76 views
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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1answer
73 views
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 ...
0
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1answer
40 views
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 ...
0
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1answer
46 views
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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votes
3answers
424 views
Why wouldn't competition prevent “usurious” payday loan rates?
The current Wiki page on "Payday Loans" claims loans are priced above marginal cost. The justification is that
If a lender chooses to innovate and reduce cost to borrowers in order to secure a ...
0
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0answers
25 views
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 ...
1
vote
1answer
109 views
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 ļ¬xed amounts, and three agents, A, B and C. So in this ...
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1answer
42 views
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 ...
3
votes
1answer
149 views
Rosen's unique equilibrium conditions: Multi dimensional strategies?
I was wondering if the uniqueness of equilibrium conditions in n-person games as published in Rosen's 1965 paper (J. B. Rosen. Existence and uniqueness of equilibrium points for concave n-person games....
1
vote
1answer
39 views
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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0answers
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Competitive Market - Production & Number of Firms
The question is as follows:
The inverse market demand for provision of gas services is given by p(y) = 1/(1+y), where p is the unit price and y measures output in appropriately scaled units. Suppose ...
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0answers
246 views
Assumptions for the existence of a Walrasian equilibrium
I have a problem set stating that a competitive equilibrium does exist under a series of assumptions on the economy.
The question is "Show that the following six assumptions are needed for existence ...
3
votes
2answers
85 views
Is Cobb-Douglas the only output function corresponding to a competitive economy?
Apologies if this is a rather simple question, I appreciate any guidance.
$$ Q(K,L) = AK^\alpha L^{\beta} $$
where A is a constant. Identify the conditions on $\alpha$ and $\beta$
for ...
1
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1answer
784 views
MICROECONOMICS: Optimal quantity produced in a Perfect Competition Market
Suppose the Total Cost function of a firm in Perfect Competition is
given by: $$C(q) = 450 + 15q + 2q^2$$
The market price is $P = 15$ per unit
Determine the optimal quantity produced by ...
6
votes
2answers
1k views
Pure exchange economy: Given an initial endowment are multiple equilibria possible?
Consider a pure exchange economy with two goods ($x_1,x_2$) and two consumers $A,B$. Both users have an initial endowment, $(\omega_1^A,\omega_2^A)$ and $(\omega_1^B,\omega_2^B)$ respectively. A price ...
0
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3answers
114 views
Looking for a term that explains market participants that lie about their participation to gain access to said market
I'm Looking for a term that explains the behavior of a market participants that will lie or exaggerate how much or what they offer in order to gain access to a market that would otherwise be ...
2
votes
1answer
266 views
Cournot equilibrium question
There are two firs in the market. They produce perfect substitutes at cost $c(y_i)=y_i/3$ for i=1,2. The demand function is $p=1-(y_1+y_2)$
Consider the Cournot competition where firms ...
0
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0answers
66 views
Do I understand the second welfare theorem correctly?
As far as I understand, the second welfare theorem says that all Pareto-optimal allocations can be reached by market equilibrium on free competitive markets.
Yet it seems that this understanding is ...
0
votes
1answer
77 views
Relationship between IRS and Competitive equilibrium
If there are increasing returns to scale in both sectors (in a 2x2x2x2) production and consumption economy, then a profit maximizing allocation most likely involves the economy producing only one type ...
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0answers
89 views
General Equilibrium allocation holding fixed a consumer's utility
I'm having some issues with solving this general equilibrium exercise.
The way I started off is by assuming that since consumer 2's utility is fixed, he will have a fixed utility function. Then ...
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0answers
258 views
Pure exchange economy: Set of multiple equilibria endowments
Initial endowments which can result in multiple equilibria in a pure exchange economy are explained here. Given a pure exchange economy, that is given the utility functions (which fulfil the usual ...
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1answer
621 views
Competitive equilibrium in Leontief economies
Consider an economy in which all consumers have, possibly different, Leontief utilities. Since preferences are not strictly convex, it is not guaranteed that a competitive equilibrium exists. I found ...
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1answer
50 views
How to find the market equilibrium by surplus maximisation when there is a consumer subside?
Let's assume a market with linear demand and supply functions, let's say $Q_d = 20 - 4p$ and $Q_s = -4 +8p$ respectively.
We can easily find the market equilibrium by either setting $Q_d = Q_s$ (or $...
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1answer
112 views
Simple equilibrium in monopoly question
Given an inverse demand function for hangars: $$P = 3 - \frac{Q}{16,000}$$ and constant marginal cost of $1$, what is the equilibrium price and quantity of hangars in a monopoly?
In a perfectly ...
2
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1answer
135 views
Stone-Geary preferences and competitive equilibrium
Does anybody know if a competitive equilibrium obtains under Stone-Geary preferences; are there multiple equilibria problems; do such preferences admit an analysis with more than one type of ...
4
votes
1answer
392 views
Maximisation problem in a multiproduct firm
I am currently reading the book "Microeconomics: Principles and Analysis" by Cowell on my own. I'm interested in the section of the multiproduct firm, but i'm confused with the use of the profit ...
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votes
3answers
113 views
Could markets compute equilibria?
It has been shown, for example in the papers
Deng, Du, The Computation of Approximate Competitive Equilibrium is PPAD-hard
Hirsch, Papadimitriou, Vavasis, Exponential Lower Bounds for Finding Brouwer ...
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1answer
120 views
Papers on time it takes to reach market equilibrium?
Are there any models which calculate the time (i.e. minutes, hours, days ect.) it takes for equilibrium to occur? I.e how long it takes for market forces to settle.
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1answer
894 views
No competitive equilibrium for pooling contracts
In class we dealt with insurance economics and, specifically, adverse selection due to information asymmetry. As one possible solution we considered pooling contracts, i.e. the same contract for both ...
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0answers
344 views
Equilibrium Uniqueness in a General Equilibrium Framework
I was wondering if anyone had any insight into the conditions that lead to a unique equilibrium in an exchange economy under a general equilibrium framework. More specifically, I know that the two "...
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1answer
79 views
Can heterogeneous prices be consistent with competitive equilibrium?
I do not want to put many constraints on the structure of the problem, except by defining a competitive equilibrium as such where firms are price takers in the factor and good(s) market, and, perhaps (...
2
votes
1answer
143 views
When to prefer maximisation of surplus and when instead to prefer minimising differences in price and q to find market equilibrium?
Two alternative approaches to compute a market equilibrium (in static analysis) are either to minimize the differences (either using abs() or a quadratic diff) between supply-demand quantities and ...
4
votes
3answers
783 views
Why labour, capital, and output levels cannot be pinned down in perfect competition?
Consider a firm producing with the following technology:
\begin{equation}
Y = AL^{\alpha}K^{\beta}
\end{equation}
Assuming that factors are paid their marginal contribution to output, it can be ...
1
vote
1answer
6k views
Number of firms in Long Run
In a competitive market, is it possible to know the change (increase/decrease) in number of firms in the Long run with a positive shift in demand for increasing costs case?
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1answer
1k views
Optimal production level for a typical firm in long-run
Assuming all firms have identical cost functions. Now suppose there is an increasing shift in the demand curve. As we all know that for increasing costs case, both average costs (AC) and marginal ...
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1answer
994 views
Competitive equilibrium in an exchange economy with lexicographic preferences [closed]
I am really stuck with this problem and not able to approach it. Any help will be much appreciated.
I tried to draw edgeworth box with initial endowment point. I do know that for competitive ...
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0answers
168 views
Competitive prices, tax and lump sum cash transfer in case of externalities
An economy is made up of two people. The utility functions are
$$u_1(x_{11},x_{12}) = x_{11}x_{12}$$
$$u_2(x_{21},x_{22}) = 2x_{21} + 2x_{22} āx_{11}$$
The initial endowments are $Ļ_1 = (1,0)$ and $...
3
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3answers
126 views
Does the price level in a competitive market have to be at the intersection of the Average Cost curve and the Marginal Cost curve?
I could see that if the price level is say lower than the intersection point , then firms won't be able to operate , but what is wrong with the price level being above the intersection point of the ...
2
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1answer
121 views
Dynamic programming problem with dimension over 1000
I am working on a project which need to solve a dynamic programming problem with dimension over 1000. In past literature, there exist several methods like Smolyak algorithm and Sparse grid method that ...
