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Existence of equilibrium in OLG economies with increasing returns

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  • Jean-Marc Bonnisseau

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Lalaina Rakotonindrainy

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

We consider a standard overlapping generation economy with a simple demographic structure with a new cohort of agents at each period with an economic activity extended over two successive periods and finitely many firms active forever. The production possibilities are described by a sequence of production mapping and the main innovation comes from the fact that we allow for increasing returns to scale of more general type of non-convexities. To describe the behavior of the firms, we consider loss-free pricing rules, which covers the case of the average pricing rule, the competitive behavior when the firms have convex production sets, and the competitive behavior with quantity constraints à la Dehez-Drèze. We prove the existence of an equilibrium under assumptions, which are at the same level of generality than the ones for the existence in an exchange economy.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00654013.

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Date of creation: Nov 2011
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Handle: RePEc:hal:cesptp:halshs-00654013

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Keywords: Overlapping generation model; increasing returns to scale; loss-free pricing rules; equilibrium; existence.;

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  1. Balasko, Yves & Shell, Karl, 1981. "The overlapping-generations model. II. The case of pure exchange with money," Journal of Economic Theory, Elsevier, Elsevier, vol. 24(1), pages 112-142, February.
  2. Dehez, Pierre & Dreze, Jacques, 1988. "Distributive production sets and equilibria with increasing returns," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 231-248, April.
  3. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, Elsevier, vol. 23(3), pages 281-306, December.
  4. Bonnisseau, Jean-Marc & Cornet, Bernard, 1988. "Existence of equilibria when firms follow bounded losses pricing rules," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 119-147, April.
  5. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 467.
  6. Cornet, Bernard, 1988. "General equilibrium theory and increasing returns : Presentation," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 103-118, April.
  7. Jean-Marc Bonnisseau & Alexandrine Jamin, 2009. "The Survival Assumption in Intertemporal Economies," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 09076, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  8. repec:hal:journl:halshs-00194881 is not listed on IDEAS
  9. Dehez, Pierre & Dreze, Jacques, 1988. "Competitive equilibria with quantity-taking producers and increasing returns to scale," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 209-230, April.
  10. Balasko, Yves & Cass, David & Shell, Karl, 1980. "Existence of competitive equilibrium in a general overlapping-generations model," Journal of Economic Theory, Elsevier, Elsevier, vol. 23(3), pages 307-322, December.
  11. Jean-Marc Bonnisseau & Alexandrine Jamin, 2003. "Equilibria with increasing returns : sufficient conditions on bounded production allocations," Cahiers de la Maison des Sciences Economiques, Université Panthéon-Sorbonne (Paris 1) b05045, Université Panthéon-Sorbonne (Paris 1), revised Jun 2005.
  12. Dierker, Egbert & Guesnerie, Roger & Neuefeind, Wilhelm, 1985. "General Equilibrium When Some Firms Follow Special Pricing Rules," Econometrica, Econometric Society, Econometric Society, vol. 53(6), pages 1369-93, November.
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