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Existence of equilibrium in OLG economies with increasing returns

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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 Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 11070.

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Length: 17 pages
Date of creation: Nov 2011
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Handle: RePEc:mse:cesdoc:11070

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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, vol. 24(1), pages 112-142, February.
  2. 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, vol. 66, pages 467.
  3. Dierker, Egbert & Guesnerie, Roger & Neuefeind, Wilhelm, 1985. "General Equilibrium When Some Firms Follow Special Pricing Rules," Econometrica, Econometric Society, vol. 53(6), pages 1369-93, November.
  4. 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.
  5. 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.
  6. Bonnisseau, J.-M. & Cornet, B., 1986. "Existence of equilibria when firms follow bounded losses pricing rules," CORE Discussion Papers 1986007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Jean-Marc Bonnisseau & Alexandrine Jamin, 2003. "Equilibria with increasing returns : sufficient conditions on bounded production allocations," Cahiers de la Maison des Sciences Economiques b05045, Université Panthéon-Sorbonne (Paris 1), revised Jun 2005.
  8. Jean-Marc Bonnisseau & Alexandrine Jamin, 2009. "The Survival Assumption in Intertemporal Economies," Documents de travail du Centre d'Economie de la Sorbonne 09076, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  9. Cornet, Bernard, 1988. "General equilibrium theory and increasing returns : Presentation," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 103-118, April.
  10. Balasko, Yves & Cass, David & Shell, Karl, 1980. "Existence of competitive equilibrium in a general overlapping-generations model," Journal of Economic Theory, Elsevier, vol. 23(3), pages 307-322, December.
  11. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
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