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Equilibrium existence results for economies with price rigidities

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  • P. Jean-Jacques Herings

    (Department of Econometrics and CentER, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, THE NETHERLANDS)

Abstract

An exchange economy with price rigidities and rationing is considered. The rationing systems allowed are very general. Several characterizations of the set of constrained equilibria are given, and new equilibrium existence results are provided. More specifically, well-known properties like the existence of equilibria without rationing of the numeraire commodity, and the existence of supply and demand constrained equilibria without rationing on the market of at least one commodity follow as special cases from the theorems proved. Finally it is shown that the equilibrium correspondence is upper semi-continuous, while it is continuous on a residual set of points. In order to prove these results a new continuity result for the budget correspondence is given.

Suggested Citation

  • P. Jean-Jacques Herings, 1995. "Equilibrium existence results for economies with price rigidities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(1), pages 63-80.
  • Handle: RePEc:spr:joecth:v:7:y:1995:i:1:p:63-80
    Note: Received: March 11, 1994; revised version July 15, 1994
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    References listed on IDEAS

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    1. van der Laan, G. & Talman, A.J.J., 1989. "Price rigidities and rationing," Discussion Paper 1989-13, Tilburg University, Center for Economic Research.
    2. Weddepohl, Claus, 1987. "Supply-constrained equilibria in economies with indexed prices," Journal of Economic Theory, Elsevier, vol. 43(2), pages 203-222, December.
    3. van der Laan, Gerard, 1980. "Equilibrium under Rigid Prices with Compensation for the consumers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 63-73, February.
    4. Wu, Ho-Mou, 1988. "Unemployment equilibrium in a random economy," Journal of Mathematical Economics, Elsevier, vol. 17(4), pages 385-400, September.
    5. Jean-Pascal Benassy, 1975. "Neo-Keynesian Disequilibrium Theory in a Monetary Economy," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 503-523.
    6. Benassy, Jean-Pascal, 1993. "Nonclearing Markets: Microeconomic Concepts and Macroeconomic Applications," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 732-761, June.
    7. Weddepohl, Claus, 1983. "Fixed price equilibria in a multifirm model," Journal of Economic Theory, Elsevier, vol. 29(1), pages 95-108, February.
    8. Dreze, Jacques H, 1975. "Existence of an Exchange Equilibrium under Price Rigidities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 301-320, June.
    9. Dehez, Pierre & Dreze, Jacques H., 1984. "On supply-constrained equilibria," Journal of Economic Theory, Elsevier, vol. 33(1), pages 172-182, June.
    10. Kurz, Mordecai, 1982. "Unemployment equilibrium in an economy with linked prices," Journal of Economic Theory, Elsevier, vol. 26(1), pages 100-123, February.
    11. Polterovich, Victor, 1993. "Rationing, Queues, and Black Markets," Econometrica, Econometric Society, vol. 61(1), pages 1-28, January.
    12. Nguyen, Trien T & Whalley, John, 1990. "General Equilibrium Analysis of Price Controls: A Computational Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 667-684, August.
    13. Nguyen, Trien T. & Whalley, John, 1986. "Equilibrium under price controls with endogenous transactions costs," Journal of Economic Theory, Elsevier, vol. 39(2), pages 290-300, August.
    14. van der Laan, Gerard, 1984. "Supply-constrained fixed price equilibria in monetary economies," Journal of Mathematical Economics, Elsevier, vol. 13(2), pages 171-187, October.
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    Cited by:

    1. Herings, P. Jean-Jacques & van der Laan, Gerard & Talman, Dolf, 2009. "Equilibria with coordination failures," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 23-37, January.
    2. Herings, P.J.J. & Talman, A.J.J. & Yang, Z.F., 1999. "Variational Inequality Problems With a Continuum of Solutions : Existence and Computation," Discussion Paper 1999-72, Tilburg University, Center for Economic Research.
    3. Herings, P.J.J. & Dreze, J., 1998. "Continua of Underemployment Equilibria," Discussion Paper 1998-05, Tilburg University, Center for Economic Research.
    4. Herings, P. J. J. & Polemarchakis, H., 2002. "Equilibrium and arbitrage in incomplete asset markets with fixed prices," Journal of Mathematical Economics, Elsevier, vol. 37(2), pages 133-155, April.
    5. Alessandro Citanna & Hervé Crès & Jacques H. Drèze & Jean-Jacques Herings & Antonio Villanacci, 2001. "Underemployment of Resources and Self-Fulfilling Beliefs: Nonwalrasian Allocations at Walrasian Prices," Sciences Po publications 003, Sciences Po.
    6. repec:spo:wpecon:info:hdl:2441/10287 is not listed on IDEAS
    7. P. Herings, 2014. "General equilibrium and the new neoclassical synthesis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(3), pages 437-477, November.
    8. Citanna, Alessandro & Cres, Herve & Dreze, Jacques & Herings, P. Jean-Jacques & Villanacci, Antonio, 2001. "Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices," Journal of Mathematical Economics, Elsevier, vol. 36(3), pages 169-200, December.
    9. Herings, P. Jean-Jacques, 1998. "On the existence of a continuum of constrained equilibria1," Journal of Mathematical Economics, Elsevier, vol. 30(3), pages 257-273, October.

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