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Chapter Fifteen - Competitive Market Mechanisms as Social Choice Procedures

In: Handbook of Social Choice and Welfare

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  • Peter J., Hammond

Abstract

A competitive market mechanism is a prominent example of a nonbinary social choice rule, typically defined for a special class of economic environments in which each social state is an economic allocation of private goods, and individuals’ preferences concern only their own personal consumption. This chapter begins by discussing which Pareto efficient allocations can be characterized as competitive equilibria with lump-sum transfers. It also discusses existence and characterization of such equilibria without lump-sum transfers. The second half of the chapter focuses on continuum economies, for which such characterization results are much more natural, given that agents have negligible influence over equilibrium prices.

Suggested Citation

  • Peter J., Hammond, 2011. "Chapter Fifteen - Competitive Market Mechanisms as Social Choice Procedures," Handbook of Social Choice and Welfare,in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 2, chapter 15, pages 47-151 Elsevier.
  • Handle: RePEc:eee:socchp:2-15
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    Keywords

    welfare theorems; general equilibrium; core equivalence; incentive compatibility;

    JEL classification:

    • I0 - Health, Education, and Welfare - - General

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