Equilibrium, Efficiency, and Welfare

2020 ◽  
pp. 211-234
Author(s):  
Robert G. Chambers
Keyword(s):  
Duality Theorem ◽  
Market Equilibrium ◽  
Consumer Surplus ◽  
Partial Equilibrium ◽  
Pareto Optima ◽  
Infimal Convolution ◽  
Welfare Theorems ◽  
Competitive Equilibria ◽  
Preference Structures ◽  
Fenchel's Duality Theorem

Competitive equilibria are studied in both partial-equilibrium and general-equilibrium settings for economies characterized by consumers with incomplete preference structures. Market equilibrium determination is developed as solving a zero-maximum problem for a supremal convolution whose dual, by Fenchel's Duality Theorem, coincides with a zero-minimum for an infimal convolution that characterizes Pareto optima. The First and Second Welfare Theorems are natural consequences. The maximization of the sum of consumer surplus and producer surplus is studied in this analytic setting, and the implications of nonsmooth preference structures or technologies for equilibrium determination are discussed.

scholarly journals Not So Sweet: Economic Implications of Restricting U.S. Sugar Imports from Mexico

2019 ◽  
Vol 51 (3) ◽  
pp. 368-384
Author(s):  
Wilson Sinclair ◽  
Amanda M. Countryman
Keyword(s):  
Free Trade Agreement ◽  
Consumer Surplus ◽  
Trade Agreement ◽  
The United States ◽  
Partial Equilibrium ◽  
Free Access ◽  
Economic Implications ◽  
Welfare Impacts ◽  
Partial Equilibrium Model ◽  
The U.S

AbstractAfter Mexican sugar producers gained unlimited, tariff-free access to the U.S. market in 2008, U.S. and Mexican governments bilaterally agreed to constrain Mexico’s sugar exports to the United States because of dumping allegations by U.S. producers in December 2014. This analysis employs a dynamic partial equilibrium model to estimate the price and welfare impacts of the U.S.-Mexico agreement by simulating the reimplementation of North American Free Trade Agreement sugar policies. Estimates suggest liberalizing the market would decrease U.S. sugar prices, translating to an average annual decrease in producer surplus of approximately $660 million and increase in consumer surplus of $1.67 billion across the simulation.

scholarly journals A Sparsity-Based Model of Bounded Rationality *

2014 ◽  
Vol 129 (4) ◽  
pp. 1661-1710 ◽  
Author(s):  
Xavier Gabaix
Keyword(s):  
Phillips Curve ◽  
Competitive Equilibrium ◽  
Limited Attention ◽  
One Dimensional ◽  
First Order ◽  
The World ◽  
Welfare Theorems ◽  
Competitive Equilibria ◽  
Rational Version ◽  
Offer Curve

AbstractThis article defines and analyzes a “sparse max” operator, which is a less than fully attentive and rational version of the traditional max operator. The agent builds (as economists do) a simplified model of the world which is sparse, considering only the variables of first-order importance. His stylized model and his resulting choices both derive from constrained optimization. Still, the sparse max remains tractable to compute. Moreover, the induced outcomes reflect basic psychological forces governing limited attention. The sparse max yields a behavioral version of basic chapters of the microeconomics textbook: consumer demand and competitive equilibrium. I obtain a behavioral version of Marshallian and Hicksian demand, Arrow-Debreu competitive equilibrium, the Slutsky matrix, the Edgeworth box, Roy’s identity, and so on. The Slutsky matrix is no longer symmetric: nonsalient prices are associated with anomalously small demand elasticities. Because the consumer exhibits nominal illusion, in the Edgeworth box, the offer curve is a two-dimensional surface rather than a one-dimensional curve. As a result, different aggregate price levels correspond to materially distinct competitive equilibria, in a similar spirit to a Phillips curve. The Arrow-Debreu welfare theorems typically do not hold. This framework provides a way to assess which parts of basic microeconomics are robust, and which are not, to the assumption of perfect maximization.

scholarly journals DYNAMIC EFFECTS OF DROUGHT ON U.S. CROP AND LIVESTOCK SECTORS

2015 ◽  
Vol 47 (2) ◽  
pp. 261-284 ◽  
Author(s):  
AMANDA M. LEISTER ◽  
PHILIP L. PAARLBERG ◽  
JOHN G. LEE
Keyword(s):  
Consumer Surplus ◽  
Partial Equilibrium ◽  
Dynamic Effects ◽  
Short Term ◽  
Price Increases ◽  
Long Run ◽  
Effects Of Drought ◽  
The U.S ◽  
Drought Effects

AbstractThis study investigates the long-term adjustments to drought by crop and livestock sectors using a dynamic partial equilibrium quarterly model of the U.S. agricultural economy. Results show that short-term drought effects including increases in crop and forage prices are in tandem with decreased live cattle prices resulting from drought-induced beef cattle herd liquidation. Crop price increases in the long run cause livestock inventory reductions, leading to fewer animals moving through the U.S. meat supply chain and increased livestock prices. Longer-term market adjustments cause a significant decrease in consumer surplus, and prolonged drought amplifies and extends the model-predicted results.

scholarly journals The Opportunity Costs of Rent Seeking

1999 ◽  
Vol 17 (2) ◽  
pp. 121-127 ◽  
Author(s):  
Tyler Cowen ◽  
Alexander Tabarrok
Keyword(s):  
General Equilibrium ◽  
Current Literature ◽  
Opportunity Cost ◽  
Consumer Surplus ◽  
Rent Seeking ◽  
Partial Equilibrium ◽  
Opportunity Costs ◽  
Alternative Resource

Abstract The costs of rent seeking exceed traditional measures when opportunity cost is considered. When die quantity of resources consumed by rent seeking is large, rent seeking draws consumer surplus out of alternative resource employments. The costs of rent seeking differ in partial and general equilibrium frameworks; Tullock (1989) recognizes this but incorrectly argues that rent seeking costs are twice as large in general than in partial equilibrium. Other authors suggest that rent seeking costs are lower once the opportunity costs of resources used in rent seeking are considered. We clear up the confusion in the current literature.

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