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Is there a Walrasian Equilibrium in Exchange Markets with Endowment Effect?

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  • Christian Schwarz

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  • Uwe Stroinski
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    Abstract

    We provide an axiomatic framework for exchange markets with a willingnessto- pay/willingness-to-accept discrepancy. First, we obtain a two parameter family of market invariants under price-scaling representing the excess demand. One of the parameters can be identified as endowment. The other is a new feature, called demand-supply gap, that leads to classical general equilibrium if zero. Second, we provide representations of price and demand as unbounded operators on an infinite dimensional Hilbert space. We prove that neither can this space be finite dimensional nor can these operators be bounded.Third, if the demand-supply gap is not zero we obtain that price and demand are not simultaneously sharply measurable and consequently a Walrasian equilibrium does not exist.

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    File URL: http://repec.rwi-essen.de/files/REP_09_082.pdf
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    Bibliographic Info

    Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0082.

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    Length: 21 pages
    Date of creation: Jan 2009
    Date of revision:
    Handle: RePEc:rwi:repape:0082

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    Related research

    Keywords: General equilibrium theory; endowment effect; non-existence of equilibrium;

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