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The identification of preferences from equilibrium prices

  • CHIAPPORI, Pierre-André
  • EKELAND, Ivar
  • KUBLER, Félix
  • POLEMARCHAKIS, Heracles

The fundamentals of an exchange economy, the preferences of individuals, can be identified from the competitive equilibrium correspondence, which associates equilibrium prices of commodities to allocations of endowments; the argument extends to production economies. The essential step is the identification of fundamentals from aggregate demand as a function of the prices of commodities and the distribution of income. The graph of the equilibrium correspondence or of the aggregate demand function satisfy non - trivial restrictions. The identification of fundamentals allows for the prediction of the response of individuals and the economy to changes in the organization of production and exchange, while restrictions on the equilibrium correspondence or the aggregate demand function imply that general equilibrium theory has testable implications.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2000024.

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Date of creation: 00 Mar 2000
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Handle: RePEc:cor:louvco:2000024
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  1. McFadden, Daniel & Mas-Colell, Andreu & Mantel, Rolf & Richter, Marcel K., 1974. "A characterization of community excess demand functions," Journal of Economic Theory, Elsevier, vol. 9(4), pages 361-374, December.
  2. Donsimoni, M. -P. & Polemarchakis, H. M., 1994. "Redistribution and welfare," Journal of Mathematical Economics, Elsevier, vol. 23(3), pages 235-242, May.
  3. Geanakoplos, John, 1984. "Utility functions for Debreu's `excess demands'," Journal of Mathematical Economics, Elsevier, vol. 13(1), pages 1-9, April.
  4. Shafer, Wayne & Sonnenschein, Hugo, 1993. "Market demand and excess demand functions," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 14, pages 671-693 Elsevier.
  5. Brown, Donald J & Matzkin, Rosa L, 1996. "Testable Restrictions on the Equilibrium Manifold," Econometrica, Econometric Society, vol. 64(6), pages 1249-62, November.
  6. Debreu, Gerard, 1974. "Excess demand functions," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 15-21, March.
  7. Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-30, May.
  8. DEBREU, Gérard, . "Smooth preferences," CORE Discussion Papers RP 132, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Lars Peter Hansen & James J. Heckman, 1996. "The Empirical Foundations of Calibration," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 87-104, Winter.
  10. repec:cup:cbooks:9780521335614 is not listed on IDEAS
  11. Mantel, Rolf R., 1974. "On the characterization of aggregate excess demand," Journal of Economic Theory, Elsevier, vol. 7(3), pages 348-353, March.
  12. DEBREU, Gérard, . "Economies with a finite set of equilibria," CORE Discussion Papers RP 67, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Snyder, Susan K., 1999. "Testable restrictions of Pareto optimal public good provision," Journal of Public Economics, Elsevier, vol. 71(1), pages 97-119, January.
  14. Sonnenschein, Hugo, 1973. "Do Walras' identity and continuity characterize the class of community excess demand functions?," Journal of Economic Theory, Elsevier, vol. 6(4), pages 345-354, August.
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