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Fundamental Non-convexity and Externalities: A Differentiable Approach

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  • Ericson Richard E.

    ()

  • Kung Fan-chin

    () (Department of Economics, East Carolina University, 10th Street, Greenville, NC 27858, USA)

Abstract

It is well known that externalities cause fundamental non-convexity problems in the production set. We demonstrate that the differentiable approach is a proper tool. Existence of equilibrium obtains without requiring aggregate convexity in consumption or production. Our model allows general externalities in consumption and production and also price dependency.

Suggested Citation

  • Ericson Richard E. & Kung Fan-chin, 2015. "Fundamental Non-convexity and Externalities: A Differentiable Approach," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(1), pages 1-14, January.
  • Handle: RePEc:bpj:bejtec:v:15:y:2015:i:1:p:14:n:2
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    References listed on IDEAS

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    1. Mas-Colell,Andreu, 1990. "The Theory of General Economic Equilibrium," Cambridge Books, Cambridge University Press, number 9780521388702.
    2. del Mercato, Elena L., 2006. "Existence of competitive equilibria with externalities: A differential viewpoint," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 525-543, August.
    3. Kung, Fan-chin, 2008. "Voluntary contributions to multiple public goods in a production economy with widespread externalities," Journal of Mathematical Economics, Elsevier, vol. 44(12), pages 1364-1378, December.
    4. Berliant, Marcus & Kung, Fan-chin, 2006. "The indeterminacy of equilibrium city formation under monopolistic competition and increasing returns," Journal of Economic Theory, Elsevier, vol. 131(1), pages 101-133, November.
    5. Jean-Marc Bonnisseau & Elena Mercato, 2010. "Externalities, consumption constraints and regular economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(1), pages 123-147, July.
    6. Boyd, John III & Conley, John P., 1997. "Fundamental Nonconvexities in Arrovian Markets and a Coasian Solution to the Problem of Externalities," Journal of Economic Theory, Elsevier, vol. 72(2), pages 388-407, February.
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    Cited by:

    1. Elena L. Mercato & Vincenzo Platino, 2017. "Private ownership economies with externalities and existence of competitive equilibria: a differentiable approach," Journal of Economics, Springer, vol. 121(1), pages 75-98, May.
    2. Elena L. Del Mercato & Vincenzo Platino, 2016. "Private ownership economies with externalities and existence of competitive equilibria: A differentiable approach," Post-Print halshs-01164015, HAL.
    3. Vincenzo Platino, 2019. "Externalities in Private Ownership Production Economies with Possibility Functions. An Existence Result," CSEF Working Papers 549, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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