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Quantity Constrained Equilibria

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Author Info
P. Jean-Jacques Herings (Universiteit Maastricht)
Gerard van der Laan () (Vrije Universiteit Amsterdam)
Dolf Talman (Universiteit Tilburg)

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Abstract

In a standard general equilibrium model it is assumed that there are no price restictions and that prices adjust infinitely fast to their equilibrium values. In this paper the set of admissible prices is allowed to be an arbitrary convex set. For such an arbitrary set it cannot be guaranteed that there exists a constrained equilibrium satisfying the usual condition that a price will be on its upper or lower bound in case of rationing. Therefore we introduce a more general equilibrium concept, called Quantity Constrained Equilibrium (QCE). At such an equilibrium the levels of supply and demand rationing are completely determined by the components of a direction in which the price system cannot be moved further without leaving the set of admissible prices. When the set is compact, we show the existence of a connected set of QCEs, containing two trivial no-trade equilibria. Moreover, the set contains for every commodity a generalized Drèze equilibrium, being a QCE at which this commodity is not being rationed, and also a generalized supply-constrained equilibrium without demand rationing. We apply this main result to several special cases, including the case of an unbounded set of admissible prices.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-116/1.

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Date of creation: 06 Dec 2001
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Handle: RePEc:dgr:uvatin:20010116

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Related research
Keywords: exchange economy; price rigidities; equilibrium; rationing.;

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Find related papers by JEL classification:
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. van der Laan, Gerard, 1980. "Equilibrium under Rigid Prices with Compensation for the consumers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 63-73, February. [Downloadable!] (restricted)
  2. Herings, P Jean-Jacques, 1996. "Equilibrium Existence Results for Economies with Price Rigidities," Economic Theory, Springer, vol. 7(1), pages 63-80, January.
    Other versions:
  3. Benassy, Jean-Pascal, 1975. "Neo-Keynesian Disequilibrium Theory in a Monetary Economy," Review of Economic Studies, Blackwell Publishing, vol. 42(4), pages 503-23, October. [Downloadable!] (restricted)
    Other versions:
  4. Laan, Gerard van der, 1982. "Simplicial approximation of unemployment equilibria," Journal of Mathematical Economics, Elsevier, vol. 9(1-2), pages 83-97, January. [Downloadable!] (restricted)
  5. P. Jean-Jacques Herings, 1997. "Endogenously determined price rigidities (*)," Economic Theory, Springer, vol. 9(3), pages 471-498.
  6. Herings,P. Jean-Jacques & Polemarchakis,H. M., 2000. "Pareto Improving Price Regulation When the Asset Market Is Incomplete," Research Memoranda 008, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
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  7. Benassy, Jean-Pascal, 1993. "Nonclearing Markets: Microeconomic Concepts and Macroeconomic Applications," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 732-61, June. [Downloadable!] (restricted)
  8. Jacques H.DREZE, 2001. "On the Macroeconomics of Uncertainty and Incomplete Markets," Discussion Papers (REL - Recherches Economiques de Louvain) 2001011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  9. Cox, Charles C, 1980. "The Enforcement of Public Price Controls," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 887-916, October. [Downloadable!] (restricted)
  10. van der Laan, Gerard, 1984. "Supply-constrained fixed price equilibria in monetary economies," Journal of Mathematical Economics, Elsevier, vol. 13(2), pages 171-187, October. [Downloadable!] (restricted)
  11. Tuinstra, Jan, 2000. "The emergence of political business cycles in a two-sector general equilibrium model," European Journal of Political Economy, Elsevier, vol. 16(3), pages 509-534, September. [Downloadable!] (restricted)
  12. Nguyen, Trien T & Whalley, John, 1990. "General Equilibrium Analysis of Price Controls: A Computational Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 667-84, August. [Downloadable!] (restricted)
  13. Herings, P. Jean-Jacques, 1998. "On the existence of a continuum of constrained equilibria1," Journal of Mathematical Economics, Elsevier, vol. 30(3), pages 257-273, October. [Downloadable!] (restricted)
  14. Weddepohl, Claus, 1987. "Supply-constrained equilibria in economies with indexed prices," Journal of Economic Theory, Elsevier, vol. 43(2), pages 203-222, December. [Downloadable!] (restricted)
  15. Nguyen, Trien T. & Whalley, John, 1986. "Equilibrium under price controls with endogenous transactions costs," Journal of Economic Theory, Elsevier, vol. 39(2), pages 290-300, August. [Downloadable!] (restricted)
  16. CITANNA, Alessandro & CRES, Herve & DREZE, Jacques & HERINGS, Jean-Jacques & VILLANACCI, Antonio, 2001. "Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices," Les Cahiers de Recherche 732, HEC Paris. [Downloadable!]
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  17. Ginsburgh, Victor A. & Van der Heyden, Ludo, 1988. "On extending the negishi approach to computing equilibria: The case of government price support policies," Journal of Economic Theory, Elsevier, vol. 44(1), pages 168-178, February. [Downloadable!] (restricted)
  18. Dehez, Pierre & Dreze, Jacques H., 1984. "On supply-constrained equilibria," Journal of Economic Theory, Elsevier, vol. 33(1), pages 172-182, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Herings, P.J.J. & Koshevoy, G.A. & Talman, D. & Yang, Z., 2002. "A general existence theorem of zero points," Discussion Paper 107, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  2. Talman, D. & Yang, Z., 2003. "On the connectedness of coincidences and zero points of mappings," Discussion Paper 73, Tilburg University, Center for Economic Research. [Downloadable!]
  3. Sander van der Hoog, 2004. "Credit and Cash-in-Advance in Disequilibrium Models," Computing in Economics and Finance 2004 294, Society for Computational Economics. [Downloadable!]
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