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The Second Welfare Theorem in Nonconvex Economies Revisisted

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Listed:
  • Bernard Cornet

    (Department of Economics, University of Kansas, Lawrence, KS 66045, USA)

Abstract

This paper extends the Second Welfare Theorem to environments in which the usual convexity and differentiability assumptions are relaxed. Instead, the behavior of consumers and firms are formulated in terms of the marginal pricing rule using a notion of normal cone. The main result establishes that the Second Welfare Theorem continues to hold under non-satiated preferences together with a regularity condition on the economy. This condition is satisfied under standard assumptions such as convexity, free disposal, or monotonicity, either on the preferences of the consumers or on the production sets of the firms, and in particular accommodates production sets with "inward kinks" that were previously ruled out.

Suggested Citation

  • Bernard Cornet, 2026. "The Second Welfare Theorem in Nonconvex Economies Revisisted," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202608, University of Kansas, Department of Economics.
    • Handle: RePEc:kan:wpaper:202608
    as

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    File URL: https://kuwpaper.ku.edu/2026Papers/202608.pdf
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    References listed on IDEAS

    as
    1. Cornet, Bernard, 1988. "General equilibrium theory and increasing returns : Presentation," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 103-118, April.
    2. M. Ali Khan, 1999. "The Mordukhovich Normal Cone and the Foundations of Welfare Economics," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(3), pages 309-338, July.
    3. repec:bla:jpbect:v:1:y:1999:i:3:p:309-38 is not listed on IDEAS
    4. Guesnerie, Roger, 1975. "Pareto Optimality in Non-Convex Economies," Econometrica, Econometric Society, vol. 43(1), pages 1-29, January.
    5. Cornet, B., 1986. "The second welfare theorem in nonconvex economies," LIDAM Discussion Papers CORE 1986030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

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