Questions tagged [general-equilibrium]

In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall (or "general") equilibrium.

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Optimal Fight Purse and Boxing Strategies

The following is all public information available to all the players in this scenario. The General Setup In the aftermath of the infamous race between the tortoise and the hare, the salty hare went ...
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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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73 views

References on mathematically rigorous general equilibrium theories

I'm looking for a relatively recent survey on the state of the art for mathematical general equilibrium. I'm especially interested in questions of uniqueness, stability and dynamics. (I'm planing on ...
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Proof of excess community demand function in Sonnenschein (1973)

Consider the following passage in Sonnenschein (1973; full citation below): Perhaps because I do not know much about the uniform Lipschitz condition, I do not follow his exposition after the first ...
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What would be the consequences of universal parity of buying power (wage value) and freedom to buy?

I've wondered about this for many, many, years..... maybe there's an answer (or several answers?) after all. As the global economy is set up, one reason a person in the US and EU can afford a nice ...
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341 views

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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308 views

Can the social planner problem be reduced to a Pareto problem or a Walrasian equilibrium problem?

The social planner problem is \begin{align} \max_{\lbrace x_i,y_i,x_j,y_j \rbrace } &\theta_i U_i(x_i,y_i) +\theta_j U_i(x_j,y_j) \\ & \text{s.t.}\\ &x_i+x_j = \omega_i^x + \omega_j^x\\ &...
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Question about MWG 17.D.1

I tried to solve by myself the exercises of MWG(Mas Colell). However, I think the exercise has an error at 17.D.1. The 17.D.1 asks us that "verify that there are multiple equilibria". However, The ...
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125 views

Money in New Keynesian models

I have been doing some reading on general equilibrium theory and it has made me highly confused regarding the logic behind NK models. If I have understood correctly, NK models are based on Walrasian ...
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193 views

General equilibrium papers on universal basic income

Are there any microeconomics or general equilibrium articles on universal basic income? Papers dealing with general wealth transfer mechanisms where a basic universal income would be a subset of the ...
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120 views

The second welfare theorem without monotonicity

Are there non monotonic preferences that are strictly convex and continues but the second welfare theorem does not hold for them?
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70 views

Decreasing consumption prices and increasing housing prices

It's election time in my country. The government boasts a decrease of 5% in consumption prices thanks to removing regulations, while the opposition blames the government for an increase of 5% in ...
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Uniqueness of Arrow-Debreu Equilibria

I have been trying to figure out conditions on the preferences of traders in an exchange economy such that the equilibrium prices are unique but I cannot be sure since all sources seem to be ...
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57 views

Deadweight Loss Due to Taxes Represented on a Graph of the Market?

Let's say a market is operating at equilibrium, with MSB=MSC, and a tax is imposed on the market. This would shift the supply curve to the left and cause a deadweight loss represented by the triangle ...
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11 views

Identify the Pareto welfare weights

I am asked to identify the Pareto welfare weights from the FOC of the following problem $max_{{x_1}{x_2}} U_1(x_1)\ st\ u_2=U_2(x_2)\ and\ x_{1n}+x_{2n}=yn$ The Langrangian is: $L=U_1(x_1)+\lambda_1(...
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33 views

Pareto Set with strictly convex preferences

Suppose the agents A and B have the following utility functions $x_A y_A+12x_A+3y_A $ and $x_By_B +8x_B+9y_B$ respectively with endowments (8,30) and (10,10). The contract curve's equation turns out ...
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9 views

Data for CGE experiments?

Does anyone know of any open-source U.S. data sets in a format appropriate to whole-economy CGE econometric modeling, i.e. data sets covering the entire economy, divided into at least 20 sectors, with ...
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40 views

Index of an Excess Demand Vector

Mas-Colell, Whinston and Green, in Microeconomic Theory (third edition), postulate the concept of an index for an excess demand vector, which is later used in the Index Theorem: A regular equilibrium ...
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52 views

Walras's law in a Fisher market

Walras's law is stated for an exchange market: each agent comes to the market with a certain endowment of each commodity, a price-vector is determined, and the demand of each agent is the best bundle ...
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59 views

How to add a third factor of production to a static CGE-Model in gEcon

I am currently using the tool gEcon trying to create static CGE-models. As a starting point I am using a sample model from the gEcon developers. I already implemented small changes and managed that I ...
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In what contexts are stable markets sub-optimal?

My understanding is that market stability is a good thing, because it allows more reliable estimates of profits (revenues minus expenses) and expected return-on-investment related to new investments. ...
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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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40 views

General equilibrium allocation with “altriustic” utilities

Has any work been done on market allocations where market participants have utility functions that depend on other players' allocations? For example, suppose I have a general equilibrium model with ...
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232 views

About Lindahl equilibrium and Pareto Optimality

Let an economy with 20 consumers, one private good $x_2$ and one public good $x_1$. The public good is produced using the private good as input with the following technology $x_1=g(z)=z^{1/2}$, where $...
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94 views

Simple Macroeconomics problem

Suppose an agent wants to maximize: $Max \sum_{t=0}^\infty \beta^t \ln(C_t) $ s.t. $C_t + I_t = Y_t$ $Y_t = K_t$ $K_{t+1} = K_t^\alpha I_t^\gamma$ where $\alpha, \gamma >0$ and $\alpha + \...
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A stable equilibrium with demand and supply?

My doubt pertains to something that is mentioned in the book by Koutsoyiannis for microeconomics (in the chapter for general equilibrium). http://www.upload.ee/image/5306829/1.jpg http://www.upload....
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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 ...
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27 views

Is an input-output model an equilibrium model?

I know the difference between CGE and input-output models. But can an input-output model be called a equilibrium model?
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What is the name for the techniques that are used to determine the determinacy of DSGE models with rational expectations?

What is the name for the techniques that are used to determine the determinacy of DSGE models with rational expectations? For some context, see e.g. the work of THE SOLUTION OF LINEAR DIFFERENCE ...
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53 views

Is local non-satiation enough to talk about Walrasian Equilibrium being subset of Core

In Advanced Microeconomic Theory, the author mentions that the Cobb Douglas utility function is neither strongly increasing nor strictly quasiconcave over all of R+. But the condition of strongly ...
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24 views

How does definition of “price equilibrium with transfer” also include the case for the definition of “walrasian equilibrium”?

According to MWG and this answer, walrasian equilibrium is a special case of price equilibrium with transfers. However, since wealth distribution is predetermined in walrasian equilibrium, would it ...
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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,~ ...
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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 ...
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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 ...
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53 views

How does supply and demand determine price for the following scenario?

Two individuals are stranded on an island. Bob and Jill. By themselves they can produce: Bob: 5 fish & 5 coconuts Jill: 5 fish & 5 coconuts If they specialize and trade, they can produce: ...
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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^...