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Classical Equilibrium With Increasing Returns

Author

Listed:
  • Antonio Villar Notario

    (Instituto Valenciano de Investigaciones Económicas)

Abstract

This paper analyzes the existence of equilibrium in a market economy with increasing returns to scale. Consumers and firms are modelled as payoff maximizers at given prices within their feasible sets. Firms are to be thought of as created by a set of consurners willing to operate some of the available technological possibilities while, at the same time, providing the required means to enable this. Rational consumers will only be willing to set up firms if they can achieve the maximum profitability attainable. A Classical Equilibrium consists of a price vector and an allocation such that supply equals demand, all active firms are equally profitable, and this is the maximurn profitability attainable at given prices.

Suggested Citation

  • Antonio Villar Notario, 1995. "Classical Equilibrium With Increasing Returns," Working Papers. Serie AD 1995-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1995-12
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1995-12.pdf
    File Function: Fisrt version / Primera version, 1995
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