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Equilibrium in quality markets, beyond the transferable case

Author

Listed:
  • G. Carlier

    (Université Paris-Dauphine, PSL Research University
    MOKAPLAN, Inria Paris)

  • I. Ekeland

    (Université Paris-Dauphine, PSL Research University)

Abstract

We consider the market for an indivisible quality good, in the tradition of standard hedonic equilibrium theory but replacing the commonly used quasi-linear assumption on consumers’ preferences by a more realistic nonlinear budget constraint. Taking advantage of quasi-linearity on the producer’s side, we prove that an optimal transport-like argument can still be used to derive existence of equilibria. We also discuss some simple one-dimensional examples.

Suggested Citation

  • G. Carlier & I. Ekeland, 2019. "Equilibrium in quality markets, beyond the transferable case," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(2), pages 379-391, March.
  • Handle: RePEc:spr:joecth:v:67:y:2019:i:2:d:10.1007_s00199-018-1118-8
    DOI: 10.1007/s00199-018-1118-8
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    References listed on IDEAS

    as
    1. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2004. "Identification and Estimation of Hedonic Models," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 60-109, February.
    2. Pierre-André Chiappori & Robert McCann & Lars Nesheim, 2010. "Hedonic price equilibria, stable matching, and optimal transport: equivalence, topology, and uniqueness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 42(2), pages 317-354, February.
    3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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    5. Alfred Galichon, 2016. "Optimal Transport Methods in Economics," Economics Books, Princeton University Press, edition 1, number 10870.
    6. James J. Heckman & Rosa L. Matzkin & Lars Nesheim, 2010. "Nonparametric Identification and Estimation of Nonadditive Hedonic Models," Econometrica, Econometric Society, vol. 78(5), pages 1569-1591, September.
    7. H. S. Houthakker, 1952. "Compensated Changes in Quantities and Qualities Consumed," Review of Economic Studies, Oxford University Press, vol. 19(3), pages 155-164.
    8. Ivar Ekeland, 2010. "Existence, uniqueness and efficiency of equilibrium in hedonic markets with multidimensional types," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 42(2), pages 275-315, February.
    9. G. Carlier & I. Ekeland, 2010. "Matching for teams," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 42(2), pages 397-418, February.
    10. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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    More about this item

    Keywords

    Quality markets; Equilibrium; Optimal transport; Nontransferable models;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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