Existence of competitive equilibria with externalities: A differential viewpoint

We consider a class of pure exchange economies with externalities. Each consumption set is described by a function called possibility function which depends on the individual initial endowment. Moreover, each possibility function, as well as each utility function, depends on the consumptions of all...

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Bibliographic Details
Published in:Journal of mathematical economics 2006-08, Vol.42 (4), p.525-543
Main Author: del Mercato, Elena L.
Format: Article
Language:English
Subjects:
Competitive equilibrium
Consumption
Economics and Finance
Equilibrium
Externalities
Externality
General economic equilibrium
General equilibrium
Homotopy approach
Humanities and Social Sciences
Mathematical economics
Mathematics
Optimization and Control
Studies
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Summary:We consider a class of pure exchange economies with externalities. Each consumption set is described by a function called possibility function which depends on the individual initial endowment. Moreover, each possibility function, as well as each utility function, depends on the consumptions of all households. Our definition of competitive equilibrium with externalities includes as a particular case the classical definition. Using homotopy arguments, under differentiability and boundary conditions, we show that for all economies the set of equilibria is non-empty and compact. This work is the first step to encompass externalities in the global analysis of equilibria.
ISSN:0304-4068
1873-1538
DOI:10.1016/j.jmateco.2005.06.003