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Simple Economies with Multiple Equilibria

  • Bergstrom Theodore C

    ()

    (University of California, Santa Barbara)

  • Shimomura Ken-Ichi

    ()

    (Kobe University)

  • Yamato Takehiko

    ()

    (Tokyo Institute of Technology)

We study a general class of pure exchange economies that have multiple equilibria. This class generalizes an example presented by Shapley and Shubik. For such economies, we find easily verified conditions that determine whether there are multiple equilibria. We also provide simple methods for constructing economies in which arbitrary pre-specified sets of prices are equilibria. These economies have strong comparative statics properties, since prices at interior competitive equilibrium depend on the parameters of utility but not on the endowment quantities. We believe that this easily manipulated special case is a valuable addition to the class of simple general equilibrium economies that can be used as testing grounds in economic theory.

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Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 9 (2009)
Issue (Month): 1 (December)
Pages: 1-31

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Handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:43
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  1. Shapley, Lloyd S & Shubik, Martin, 1977. "An Example of a Trading Economy with Three Competitive Equilibria," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 873-75, August.
  2. Gjerstad, S., 1996. "Multiple Equilibria in Exchange Economies with Homothetic, Nearly Identical Preferences," Papers 288, Minnesota - Center for Economic Research.
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