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Existence and efficiency of equilibrium in economies with increasing returns to scale: An exposition

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  • Antonio Villar Notario

    (Instituto Valenciano de Investigaciones Económicas)

Abstract

The purpose of this paper is to offer an exposition of the results on the existence and optimality of equilibria when production sets are not assumed to be convex, in a general equilibrium framework. We aim at providing a formal and systematic account of the main results available, rather than survey the literature. Besides presenting an abstract model, where firms' behavior is described by general pricing rules, we analyze the family of Loss-free Pricing Rules (focusing on Profit Maximization, both constrained and unconstrained, and Average Cost Pricing), and the Marginal Pricing Rule and other regulation policies. Then, we discuss the efficiency problem, referring to both the first and second welfare theorems.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1994-07.pdf
File Function: Fisrt version / Primera version, 1994
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1994-07.

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Length: 75 pages
Date of creation: May 1994
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:1994-07

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Keywords: Increasing returns; equilibrium; optimality;

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References

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  8. Dierker,Egbert & Neuefeind,Wilhelm, 1987. "Quantity guided price setting," Discussion Paper Serie A 129, University of Bonn, Germany.
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  38. Bonnisseau, J.-M. & Cornet, B., 1988. "Existense of marginal cost pricing equilibria: the nonsmooth case," CORE Discussion Papers 1988015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Cited by:
  1. Peter J. Hammond & Antonio Villar, . "Efficiency with Non-Convexities: Extending the "Scandinavian Consensus" Approaches," Working Papers 97036, Stanford University, Department of Economics.

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