Market Failures and Equilibria in Banach Lattices: New Tangent and Normal Cones

Journal article: In this paper, we consider an economy with infinitely many commodities and market failures such as increasing returns to scale and external effects or other regarding preferences. The commodity space is a Banach lattice possibly without interior points in the positive cone in order to include most of the relevant commodity spaces in economics. We propose a new definition of the marginal pricing rule through a new tangent cone to the production set at a point of its (non-smooth) boundary. The major contribution is the unification of many previous works with convex or non-convex production sets, smooth or non-smooth, for the competitive equilibria and for the marginal pricing equilibria, with or without external effects, in finite-dimensional spaces as well as in infinite-dimensional spaces. In order to prove the existence of a marginal pricing equilibria, we also provide a suitable properness condition on non-convex technologies to deal with the emptiness of the interior of the positive cone.

Author(s)

Jean-Marc Bonnisseau, Matías Fuentes

Journal
  • Journal of Optimization Theory and Applications
Date of publication
  • 2020
Keywords JEL
C6 D5
Keywords
  • Marginal pricing rule
  • Banach lattices
  • Market failures
  • Properness
  • General equilibrium
Pages
  • 338–367
Version
  • 1
Volume
  • 184