Pure exchange and general equilibrium

2020 ◽  
pp. 187-231
Author(s):  
David M. Kreps
Keyword(s):  
General Equilibrium ◽  
Walrasian Equilibrium ◽  
Equilibrium Prices ◽  
Pure Exchange

This chapter focuses on situations of pure exchange, where consumers wish to exchange bundles of goods they hold at the outset for other bundles they will subsequently consume. It uses this setting to introduce the theory of price-mediated market transactions and, more particularly, the theory of general equilibrium, in which all markets in all goods are considered simultaneously. Following in the footsteps of generations of classical microeconomists, the chapter makes the assertion that in many situations of pure exchange, the consumer will wind up at the consumption allocation part of some Walrasian equilibrium for the economy, and insofar as there are markets in these goods, prices will correspond to equilibrium prices. One thing that the concept of a Walrasian equilibrium does not provide is any sense of how market operates. There is no model here of who sets prices, or what gets exchanged for what, when, and where.

Walrasian Equilibrium and Reputation under Imperfect Public Monitoring

2010 ◽  
Vol 10 (1) ◽  
Author(s):  
Bernardita Vial
Keyword(s):  
Steady State ◽  
Repeated Game ◽  
Walrasian Equilibrium ◽  
Steady State Distribution ◽  
State Distribution ◽  
High Quality ◽  
Price Function ◽  
Equilibrium Prices ◽  
Public Monitoring ◽  
Quality Production

This paper examines a reputation-based mechanism that sustains the provision of high quality in the presence of competition among providers, where the incentive for high-quality production comes from a reputation premium: firms with higher reputations charge higher prices. The way we model the market highlights the fact that prices are not solely determined from consumers' willingness to pay as in the monopolistic setting studied in the previous literature. In effect, equilibrium prices are determined endogenously, from the interaction of the distribution of consumers' valuations for high quality and the distribution of firms' reputations—the demand and the supply sides of the market, respectively. This paper shows that: (i) there is a steady-state distribution of reputations, a result that allows the study of a stationary equilibrium; (ii) there are parameter configurations for which the existence of a high-quality equilibrium is guaranteed, and where the incentives for high quality production in the repeated game depend on the shape of the price function; and (iii) the Walrasian-equilibrium price function depends on the shape of the steady-state distribution of reputations, and the assignment of consumers to firms with different reputation levels in such an equilibrium is positively assortative if quality is a normal good.

scholarly journals János Kornai and general equilibrium theory

2018 ◽  
Vol 68 (s1) ◽  
pp. 27-52 ◽  
Author(s):  
Mehrdad Vahabi
Keyword(s):  
General Equilibrium ◽  
Reference Model ◽  
Equilibrium Theory ◽  
Walrasian Equilibrium ◽  
Second Phase ◽  
Soft Budget Constraint ◽  
General Equilibrium Theory ◽  
Credible Commitments ◽  
Classical Economics ◽  
System Paradigm

This paper explores the evolution of Kornai’s thought on general equilibrium theory (GET) and his position on mainstream economics. Three moments in this evolution will be highlighted, starting by his rejection of GET and advocating disequilibrium in Anti-Equilibrium (1971). While Kornai does not treat the “equilibrium paradigm” as irrelevant, he suggests an alternative paradigm, namely economic systems theory that he further develops in the 1980s as “system paradigm”. Economics of Shortage (1980) marks a second phase in which Kornai distinguishes Walrasian equilibrium from normal state or Marshallian equilibrium. In this phase, he supports Marshallian equilibrium rather than disequilibrium. Finally, By Force of Thought (2006) is a critical self-appraisal in which Kornai considers Anti-Equilibrium as a “failure” and acknowledges GET as a benchmark of an ideal competitive market. He now advocates a Walrasian equilibrium as an abstract reference model, but refuses to consider this model as a description of reality. In this sense, he rejects the New Classical economics. Paradoxically, however, his original heterodox concept of “soft budget constraint”, irreconcilable with standard microeconomics, has been integrated into new microeconomics as an optimal intertemporal strategy of a maximizing agent in the absence of credible commitments. It will be argued that Kornai’s so-called failure is rather related to his half-in, half-out mainstream position, while his institutionalist system paradigm is still a heterodox research project of the future.

Production prices and general equilibrium prices

1989 ◽  
Vol 18 (3) ◽  
pp. 263-280 ◽  
Author(s):  
Rose-Anne Dana ◽  
Monique Florenzano ◽  
Cuong Le Van ◽  
Dominique Levy
Keyword(s):  
General Equilibrium ◽  
Equilibrium Prices ◽  
Production Prices
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