On the regularity of smooth production economies with externalities: Competitive equilibrium à la Nash
Journal article: We consider a general equilibrium model of a private ownership economy with consumption and production externalities. The choices of all agents (households and firms) may affect utility functions and production technologies. The allocation of a competitive equilibrium is a Nash equilibrium. We provide an example showing that, under standard assumptions, competitive equilibria are indeterminate in an open set of the household’s endowments. Next, we consider a new version of this model, with firms’ endowments in the spirit of Geanakoplos et al. (J Math Econ 19:113–151, 1990). In our model, firms’ endowments impact the technologies of the other firms. We then prove that, generically in the space of endowments of households and firms, each economy has a finite number of competitive equilibria and each competitive equilibrium is locally a differentiable map of the fundamental parameters.
Author(s)
Elena L. del Mercato, Vincenzo Platino
Journal
- Economic Theory
Date of publication
- 2017
Keywords JEL
Keywords
- Private ownership economies
- Competitive equilibrium à la Nash
- Regular economies
- Externalities
Pages
- 287-307
URL of the HAL notice
Version
- 1
Volume
- 63