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Equilibrium selections

Author

Listed:
  • Beth Allen
  • Jayasri Dutta
  • Heraklis M. Polemarchakis

Abstract

This paper studies the outcome of fully insured random selections among multiple competitive equilibria. This defines an iterative procedure of reallocation which is Pareto improving at each step. The process converges to a unique Pareto optimal allocation in finitely many steps. The key requirement is that random selections be continuous, which is a generic condition for smooth exchange economies with strictly concave utility functions.

Suggested Citation

  • Beth Allen & Jayasri Dutta & Heraklis M. Polemarchakis, 1994. "Equilibrium selections," Discussion Paper / Institute for Empirical Macroeconomics 90, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmem:90
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    References listed on IDEAS

    as
    1. E. Malinvaud, 1972. "Prices for Individual Consumption, Quantity Indicators for Collective Consumption," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(4), pages 385-405.
    2. Balasko, Yves, 1983. "Extrinsic uncertainty revisited," Journal of Economic Theory, Elsevier, vol. 31(2), pages 203-210, December.
    3. Edmond Malinvaud, 1974. "The Allocation of Individual Risks in Large Markets," International Economic Association Series, in: Jacques H. Drèze (ed.), Allocation under Uncertainty: Equilibrium and Optimality, chapter 8, pages 110-125, Palgrave Macmillan.
    4. Mas-Colell, Andreu & Nachbar, John H., 1991. "On the finiteness of the number of critical equilibria, with an application to random selections," Journal of Mathematical Economics, Elsevier, vol. 20(4), pages 397-409.
    5. Chichilnisky, G. & Dutta, J. & Heal, G.M., 1992. "Price Uncertainty and Derivative Securities in a General Equilibrium Model," Papers 178, Cambridge - Risk, Information & Quantity Signals.
    6. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
    7. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
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    Cited by:

    1. Ghosal, Sayantan & Morelli, Massimo, 2004. "Retrading in market games," Journal of Economic Theory, Elsevier, vol. 115(1), pages 151-181, March.
    2. Dutta, Jayasri & Morris, Stephen, 1997. "The Revelation of Information and Self-Fulfilling Beliefs," Journal of Economic Theory, Elsevier, vol. 73(1), pages 231-244, March.
    3. Hector Calvo-Pardo, 2009. "Are the antiglobalists right? Gains-from-trade without a Walrasian auctioneer," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 561-592, March.

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    More about this item

    Keywords

    Prices;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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