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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927 views

Simulating Real Business Cycle

Basically I need to replicate Hartley's 'A User's Guide to Solving Real Business Cycle Models' (http://www.econ.ucdavis.edu/faculty/kdsalyer/LECTURES/Ecn235a/Linearization/ugfinal.pdf). Specifically, ...
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299 views

Applications/generalizations of a theorem of Debreu

I would like to know how the last theorem in Debreu's paper "Neighboring economic agents" (La Decision 171 (1969): 85-90; reprinted in G. Debreu, Mathematical Economics: Twenty Papers of Gerard Debreu ...
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950 views

What is the true source of dynamic(Pareto) inefficiency in OLG models?

This question confuses me for some time. My first impression is that Pareto sub-optimality is due to feature that old generations will consume everything without any incentive to trade. But after ...
7
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2answers
207 views

What is the usefulness of approximating an optimal decision rule that close enough to steadystate in RBC model?

I'm reading understanding real business cycle by Plosser. Here's my crude understanding: For a RBC model, the FOCs of lagrangian together with transversality condition usually forms a nonlinear ...
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3answers
2k views

How can I draw an edgeworth box with 3 different goods?

If there are 3 types of goods(x,y,z) and 2 consumers (a,b) how can I draw the Edgeworth box? It must be 3 dimensional, right? Is there a software or online tool that I can use to draw a 3D Edgeworth ...
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111 views

Are no arbitrage models and equilibrium models equivalent?

This YouTube video from WHU (starting from 3:50) claims that no-arbitrage models (such as Black-Scholes and HJM) are equivalent to equilibrium models (such as CAPM or C-CAPM). He uses the Euler ...
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1answer
5k views

“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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1answer
103 views

How likely are the Sonnenschein-Mantel-Debreu results?

I have been reading about the SMD results and it's "damning" nature for GET. My understanding of the result is as follows: price changes not only cause a substitution effect but also change the wealth ...
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266 views

Throw-away paradox with independent goods

The throw-away paradox is a situation in which a trader can gain by throwing away some of his initial endowment. The specific example, brought by Aumann and Peleg in 1974, concerns an economy with ...
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713 views

Does a General Equilibrium here require Pareto Optimality?

There are two consumers $A$ and $B$, and two producers $X$ and $Y$. he consumers are endowed with labour(L) and capital(K) $L_A,K_A$, and $L_B,K_B$ respectively. The preferences of the two consumers ...
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292 views

Solving Kaplan and Menzio: Shopping Time

Kaplan and Menzio's shopping time model is a search&matching unemployment model where we, for a steady state equilibrium, need to determine to variables: $J$: Value of a worker $u$: unemployment ...
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1answer
150 views

State of general equilibrium theories Post Blanchard 2008

This question arose from a useful comment I received upon answering a question on this site, and a recent question from a doctoral student. The so-called theory of general equilibrium (including the ...
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225 views

Equilibrium with Externalities: Solving without FOC

I have a general equilibrium problem, where households given objective function $U(c,n)$ solve for working hours and consumption $n, c$, and firms use labor to produce a consumption good - their ...
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107 views

Modelling Pay what you want

I have been trying to model a Pay What you Want scheme. Now, for a monopoly it is clear that monopoly will have more profit by setting monopoly pricing assuming all players are selfish. But consider a ...
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187 views

Stimulus Effect of the Minimum Wage

In the question about the minimum wage found here, I have heard several times that an increase in the minimum wage can, as one of several competing effects, "boost the economy" by increasing the ...
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257 views

Do general equilibrium models include money?

An economics professor told me that General Equilibrium models are a sophistication of barter. Does that imply that they don't include money? And if that is the case, are there any attempts to include ...
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1answer
55 views

Why are pricing charts treated as continuous series?

I understand that prices are set by actors' offers to buy and sell within the market, however, when analyzing the data it seems to often be treated as though the price is continuously varying like ...
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1answer
800 views

Is the contract curve orthogonal to the priceline?

Consider an exchange economy with two consumers A and B, two goods x, y. Consumers have identical preferences $U=xy$. Total available endowment are $E_x$ and $E_y$. This is the background of a ...
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1answer
443 views

How does Brouwer's fixed point theorem relate to Walrasian equilibrium?

I am trying to understand Walrasian equilibrium and its connection to fixed points, especially how we can apply Brouwer’s fixed point theorem to the notion of Walrasian equilibrium. I understand the ...
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76 views

What is an equilibrium generated by replication?

Sorry this might be a little too rudimentary for you, but I'm not an Econ background. When I was doing exercises for MGW chapter 17 "Positive Existence of Equilibrium" I came across the following ...
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138 views

What methods - inspired by Haavelmo’s Structural Econometrics - can show that a partial equilibrium model is unreliable?

According to Spanos 2014 Revisiting Haavelmo's Structural econometrics: Bridging the gap between theory and data Dynamic Stochastic General Equilibrium models are statistically inadequate, in such an ...
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227 views

Properties of Financial Markets in Real Life

When studying financial economics, three concepts appear everywhere Equilibria (investors maximise utility, markets clear and aggregated demand equals aggregated supply) Completeness (there are ...
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79 views

Edgeworth box and identical tastes

If tastes are homothetic and identical, does this imply that the contract curve is the line connecting the lower left and upper right corners of the box? My understanding: no, it does not. Consumers' ...
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116 views

What can we know for sure among ambiguous impulse responses in RBC?

I'm trying to understand the section on responses to productivity disturbances in Understanding Real Business Cycles by Plossor. It seems to me ambiguity of representative agent's response in ...
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20k views

Equilibrium price and quantity - consumer and producer surplus

Inverse function of market demand for certain good is equal to $P=100-0.25Q$, inverse supply function is $P=20+0.55Q$. Calculate equilibrium price and quantity. Furthermore calculate consumer and ...
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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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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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349 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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74 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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1answer
1k views

Why is the production possibility set convex?

I'm studying International Trade and came across this question: Suppose a specific factor model where the global production of something is given by $Q_{w}=Q_{1}(.) + Q_{2}(.)$, with $Q_{1}, Q_{2}$ ...
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1answer
113 views

Say's law stated in terms of general equilibrium theory?

Say's law is roughly that "an increase in aggregate supply generates an equal increase in aggregate demand". Can this law be stated, or derived from, a model of general equilibrium? EDIT: what if we ...
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1answer
71 views

Looking for discussion on equilibrium vs dynamic models in econometrics

I'm a statistician/machine learning scientist more familiar with molecular bio than economics. Trying to find out if an issue I perceive in bio modeling also occurs in econometric modeling. A common ...
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1answer
551 views

Quantity supplied & demanded equation with tax

Here's the simple question I can't get my head around :( QD= 120-P QS= 2P-10 Tax= 25 euro per unit How much does the government receive?
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1answer
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Price ratio determined by endowments only?

Am I right to say in an Exchange Economy with two consumers with identical preferences, the equilibrium price (WEA) of the two goods would be determined by availability of two goods, i.e, total ...
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1answer
202 views

Blocking Coalitions

For $n$ individuals, can a blocking coalition only be formed by at least $n/2$ individuals? For example, if there are 6 individuals, can less than 3 individuals form blocking coalitions?
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1answer
558 views

Writing the core as the intersection of pareto efficient outcomes of all coalitions

I have been reviewing general equilibrium models and was trying to find an efficient method for computing the core of a cooperative game. I was taught this topic in a very poor way so I believe I ...
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1answer
242 views

Perfect risk sharing in Arrow-Debreu w/ the same subjective beliefs over states

So I'm looking at a 2-agent Arrow-Debreu economy with one good. Consumption and endowments are zero in t=0, and 2 states are possible in t=1 with aggregate endowment in both states equal to 1. We ...
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58 views

Solving Ag=b with non symmetric A

Following is a question that did not receive attention at math.SE at all. I am aware that is would be better suited there, but given its Economic background, perhaps it will get more attention here. ...
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Price discriminating monopolist question

A price discriminating monopolist sells in two markets. Inverse demand in market 1 is given by: $$P_1(Q_1) = 80 - (1/2)Q_1$$ and inverse demand in market 2 is given by: $$P_2(Q_2) = 100 - Q_2$$ The ...
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1answer
293 views

Solving Stochastic Dynamic Optimization Problems: A difficulty with Lagrange Multipliers

In Wickens' Macroeconomics book, in page 552, the author states the following: «The stochastic problem can be solved using the method of Lagrange multipliers, but there is a problem with this ...
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Macroeconomics: Aggregate Demand, Equilibrium Dynamics and Expenditure Multipliers

I am having a hard time with the following economic questions (See attached). Here is my approach: Note about the curves: The graph below depicts an economy where a decline in aggregate demand has ...
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1answer
149 views

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 ...
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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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45 views

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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344 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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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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How to find walrasian asignations? [closed]

In a economy Arrow Debreau of pure exchange with two agents and two goods. With utility function of Leontief for agent B, where $U_b(x_b,y_b)=\min(x_b,y_b)$; and for agent A a simple Cobb-Douglas $U_a(...
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2answers
386 views

Application of Intermediate Value Theorem for General Equilibrium

Here's a problem restated from Ross Starr's General Equilibrium Theory. Consider a two-commodity economy with an excess demand function $Z(p)=(Z_1(p),Z_2(p))$. The price space is $p \in P = \left \{...
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3answers
1k views

competitive equilibrium, Walrasian equilibrium, Walrasian auction

There are several sellers holding some indivisible goods, and several potential buyers with different valuations for these goods. I need to calculate the Walrasian equilibrium in this scenario, but ...
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2answers
224 views

What are the assumptions behind calculating the market equilibrium from supply and demand curves?

Imagine that there are 5 buyers (B1,...,B5) with maximum willingness to pay as follows: B1 = $5 B2 = $4 B3 = $3 B4 = $2 B5 = $1 Imagine that there are 5 sellers (...