Economics Stack Exchange
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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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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\\ &y_i+y_j = \omega_i^y + \omega_j^y\\ \end{align} where…
Stan Shunpike
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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. If not, I'm happy to call this a failed attempt…
FooBar
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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 two sentences of the proof. That is, do the…
Ryan da Silva
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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 assume a dynamic economy? I.e. where saving is…
user56834
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Unable to determine price ratio for a pure exchange economy

The problem is simple. However, I'm having trouble deriving the price vector for the system. What exactly am I doing wrong/missing out? Two consumers. $$ U_A = \min(x,y), \hskip 20pt U_B = x+y. $$ Initial endowments $$ (x_A,y_A)=(100,100),…
user795028
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Non-existence of general equilibrium with quasi-linear utility

I recently came across an interesting example of why general equilibrium need not exist with quasi-linear utility (in case anyone is interested, I'm posting this at the end). To make the example work, you need to assume that one person's endowment…
afreelunch
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Wealth transfer by Social Planner in GE

I am reading the definition of a price equilibrium with transfer in MWG on page 548, 524-5. Consider two-consumer exchange economy. If social planner wants to transfer wealth, how does she achieve this? Two consumers are born with some apples and…
Frank Swanton
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What should I learn from heterodox economy?

As a graduate and master student, everything I've learned and I'm learning is from mainstream economy which in some parts seems like propaganda. Most of theories comes from the hypotesis of perfect compentence and other not general proved statements…
DPedro
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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 contradicting each other. On the Arrow-Debreu wikipedia…
Denizalp
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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 was able to find an equilibrium after loading the…
René
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What purpose does general equilibrium serve in practice?

What purpose does general equilibrium serve in practice? How is it useful for people (since economics is supposed to assist politics, which is supposed to benefit people)?
mavavilj
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Efficient allocations with perfect complements

Consider a very simple economy with two agents (A, B) and two goods ($x$, $y$). Agent A has utility $u_a = \min \{x_a, 2y_a\}$; agent B symmetrically has utility $u_b = \min \{2x_b, y_b\}$. Suppose that there are 3 units of $x$ and 3 units of $y$ in…
afreelunch
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Are weak and strong pareto optimality equivalent in terms of efficiency and equity?

Can I claim that the concepts of weak and strong Pareto optimality are equivalent both in terms of efficiency and equity among agents and generate the same level of social welfare? I know that when preferences are monotonic and continuous, weakly…
user480530
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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 increasing in R+ is used to prove that set of…
Lol
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