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Existence and optimality of social equilibrium with many convex and nonconvex firms

Author

Listed:
  • Antonio Villar Notario

    (Instituto Valenciano de Investigaciones Económicas)

Abstract

This paper analyzes the existence of efficient equilibrium allocations in an economy with many convex and non-convex firms. A Social Equilibrium is defined as a price vector and an allocation satisfying the following properties: a) Consumers satisfy their preferences, subject to their budget constraints; b,l) Convex firms maximize profits at given prices; b,2) Non-convex firms maximize profits at given prices, subject to an input constraint; and c) All markets clear. We show that, under suitable assumptions, a Pareto Optimal Social Equilibrium does exist. This result can be interpreted as defining a regulation policy yielding efficient outcomes, which consists of imposing constraints on the availability of some inputs for the non-convex firms, and let them act in the market as (constrained) profit maximizers.

Suggested Citation

  • Antonio Villar Notario, 1994. "Existence and optimality of social equilibrium with many convex and nonconvex firms," Working Papers. Serie AD 1994-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1994-12
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1994-12.pdf
    File Function: Fisrt version / Primera version, 1994
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    Cited by:

    1. Antonio Villar, 1994. "Existence and efficiency of equilibrium in economics with increasing returns to scale: an exposition," Investigaciones Economicas, Fundación SEPI, vol. 18(2), pages 205-243, May.

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