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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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 ...
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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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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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"Competitive equilibrium" vs. "General equilibrium"

What is the difference between the term "competitive equilibrium" and the term "general equilibrium"? Here in econ.SE, they are two different tags, so there is probably a difference between them, but ...
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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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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 ...
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What determines the outcome of a price war, and why isn't that outcome reached instantaneously?

Mary is making a hefty profit manufacturing and selling widgets. Jim has some money laying around and he is trying to figure out if he shouldn't start manufacturing some widgets too. In this example ...
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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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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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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 ...
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Does the concept of Nash-equilibrium conflict with the concept of market equilibrium in the lemon market

Consider a version of Akerlof's Lemon market with two types of sellers. One type sells Quality cars the other type sells Lemons. Buyers' reservation prices are $r_{B,Q}$ for a Quality car and $r_{B,L}$...
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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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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 ...
Sade Ifada's user avatar
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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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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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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-...
John's user avatar
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In a competitive equilibrium, can price of a commodity ever be zero?

I don't think they can be, but I'm not very sure. Are their special cases where the equilibrium is competitive even when prices are zero?
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How do economists explain "If You Want to Win, Tell Your Team It’s Losing (a Little)." along with self-efficacy

How do economists explain: "If You Want to Win, Tell Your Team It’s Losing (a Little)." ? I read this article. And I learnt that— "The relationship between the score and the likelihood ...
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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 ...
Héctor Garrido's user avatar
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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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How to find the General Equilibria allowing for infinitesimal prices?

I know there can’t exist a usual Walrasian Equilibrium when both agents have the same lexicographic preferences: If both agents had the preferences $(x,y) \succeq (x’,y’) \iff:$ $x > x’ \text{ or } ...
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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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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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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 ...
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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 ...
Kushh Raghav's user avatar
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What Does "Quantity" Represent When Looking at Supply and Demand?

There are several possible scenarios involving changes in supply and demand that people are supposed to memorize in AS Economics. For example, when Either Demand OR Supply Move on Their Own: Rising ...
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Uniqueness of utilities in competitive equilibrium

Suppose several traders are given some initial endowment of goods. Then, a free market opens and they trade until the market is at a competitive equilibrium. Each trader now has a final utility which ...
Erel Segal-Halevi's user avatar
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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 $\...
Maybeline Lee's user avatar
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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 ...
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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....
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Calculating price in a pure exchange economy

The problem is simple, I'm not really sure of my answer though. Consider an economy where there are two consumers and two goods: $$U_1(x_{11}, x_{21}) = x_{11}$$ $$U_2(x_{12}, x_{22}) = x_{22}$$ $...
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Non-unique utilities in a competitive equilibrium

In continuation to this question: Uniqueness of utilities in competitive equilibrium I think I found a simple example in which the utilities in equilibrium are not unique, and wanted to check if it is ...
Erel Segal-Halevi's user avatar
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How to solve the Bertrand model when marginal costs are different and not constant?

Find the equilibrium in the Bertrand model with two firms, with total costs given by: $TC_1(q_1) = \alpha q_{1}^2$ $TC_2(q_2) = \beta q_{2}^2$ Inverse demand is given by $P = A - Q$, where $Q = q_1 + ...
Nicolas Torres's user avatar
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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 ...
Ceeerson's user avatar
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In GE, is price ever exogenous?

In general equilibrium models, is ever price exogenously given rather than endogenously determined in the equilibrium? Now, which price am I talking about? Consider an economy with production. There ...
Frank Swanton's user avatar
2 votes
2 answers
366 views

Exchange economy with two agents, what's the competitive equilibrium?

I'm currently doing this assignment but I'm keep getting stuck by this question. I put the Lagrange function for both agents and get the MRS / Price ratio but what should I do from there?
carlos21's user avatar
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1 answer
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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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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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How to find the competitive equilibrium?

Consider a $2$-good, $2$-person pure-exchange economy where $A$ is endowed with $(0,5)$ and $B$ is endowed with $(5,0)$. If the utility functions are $u_A = xy$ and $u_B = \min\{x,y\}$, what are all ...
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2 votes
3 answers
171 views

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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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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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 ...
robot112's user avatar
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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 ...
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2 votes
1 answer
192 views

Refinements of Walrasian equilibrium

In Walrasian equilibrium there is a market clearing price, that is $$ D(p) = S(p) $$ or the supply is worthless, so you can have $$ D(p) < S(p) \mbox{ if } p = 0. $$ This can be summarized as $$ p \...
Giskard's user avatar
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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 ...
studentp's user avatar
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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 ...
Antonello's user avatar
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Market equilibrium and pareto efficiency

How can I prove that the equilibrum point $D(p)=S(p)$ is pareto efficient? The definition of pareto efficient: there is no way to make any person better off without hurting anybody else $D(p)$ is ...
user128422's user avatar
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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 ...
sincostancot's user avatar
2 votes
1 answer
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Productive Allocative Efficiency (Competitive Equilibrium)

I am doing an Intermediate Microeconomics class... in a 2*2*2*2 economy, I know that MRS (marginal rate of substitution) is supposed to be equal to MRTS (marginal rate of technical substitution) in ...
TheEconomist's user avatar
2 votes
1 answer
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Defining a Competitive Equilibrium for a two Period Model

Consider an economy that lasts for two periods populated by a representative consumer/worker, a representative firm, and a government. After these two periods, the economy ends. The question asks me ...
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