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Walras Equilibrium with Coordination

Author

Listed:
  • Birgit Grodal

    (University of Copenhagen, Institute of Economics)

  • Karl Vind

    (University of Copenhagen, Institute of Economics)

Abstract

We consider a pure exchange economy with private ownership in which consumers have interdependent preferences. Hence, consumers’ preferences are defined on the states of the economy. In a Walras equilibrium for such an economy, it may, of course, be possible for two or more consumers to simultaneously change their net trades and thereby obtain a preferred state.We use the concept of coordination introduced by Vind (1983) to define an exogenously given coordination structure in the economy and define a new equilibrium concept, Walras equilibrium with coordination. In such an equilibrium individual consumers take prices and initial endowments as given, and consumers do not expect to be able to obtain a preferred state when they coordinate their choise of net trades. By using the existence theorem for an equilibrium in a social system with oordination, we set conditions for the existence of a Walras equilibrium with coordination.

Suggested Citation

  • Birgit Grodal & Karl Vind, 2000. "Walras Equilibrium with Coordination," Discussion Papers 00-18, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:0018
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/2000/0018.pdf/
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    Keywords

    Walras Equilibrium with Coordination; Coordination; Social System; Households; Incomplete Markets;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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