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Existence of equilibrium in OLG economies with increasing returns

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Abstract

We consider a standard overlapping generation economy with a simple demographic structure with a new cohort of agents at each period with an economic activity extended over two successive periods and finitely many firms active forever. The production possibilities are described by a sequence of production mapping and the main innovation comes from the fact that we allow for increasing returns to scale of more general type of non-convexities. To describe the behavior of the firms, we consider loss-free pricing rules, which covers the case of the average pricing rule, the competitive behavior when the firms have convex production sets, and the competitive behavior with quantity constraints à la Dehez-Drèze. We prove the existence of an equilibrium under assumptions, which are at the same level of generality than the ones for the existence in an exchange economy

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  • Jean-Marc Bonnisseau & Lalaina Rakotonindrainy, 2011. "Existence of equilibrium in OLG economies with increasing returns," Documents de travail du Centre d'Economie de la Sorbonne 11070, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:11070
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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Jean-Marc Bonnisseau & Alexandrine Jamin, 2008. "Equilibria with Increasing Returns: Sufficient Conditions on Bounded Allocations," Post-Print halshs-00309536, HAL.
    3. Balasko, Yves & Shell, Karl, 1981. "The overlapping-generations model. II. The case of pure exchange with money," Journal of Economic Theory, Elsevier, vol. 24(1), pages 112-142, February.
    4. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
    5. Cornet, Bernard, 1988. "General equilibrium theory and increasing returns : Presentation," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 103-118, April.
    6. Bonnisseau Jean-Marc & Jamin Alexandrine, 2011. "The Survival Assumption in Intertemporal Economies," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-18, June.
    7. Bonnisseau, Jean-Marc & Cornet, Bernard, 1988. "Existence of equilibria when firms follow bounded losses pricing rules," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 119-147, April.
    8. Dehez, Pierre & Dreze, Jacques, 1988. "Distributive production sets and equilibria with increasing returns," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 231-248, April.
    9. Dehez, Pierre & Dreze, Jacques, 1988. "Competitive equilibria with quantity-taking producers and increasing returns to scale," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 209-230, April.
    10. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66(6), pages 467-467.
    11. Dierker, Egbert & Guesnerie, Roger & Neuefeind, Wilhelm, 1985. "General Equilibrium When Some Firms Follow Special Pricing Rules," Econometrica, Econometric Society, vol. 53(6), pages 1369-1393, November.
    12. Balasko, Yves & Cass, David & Shell, Karl, 1980. "Existence of competitive equilibrium in a general overlapping-generations model," Journal of Economic Theory, Elsevier, vol. 23(3), pages 307-322, December.
    13. Michael Magill & Martine Quinzii, "undated". "The Stock Market in the Overlapping Generations," Department of Economics 99-13, California Davis - Department of Economics.
    14. J. M. Bonnisseau & A. Jamin, 2008. "Equilibria with Increasing Returns: Sufficient Conditions on Bounded Production Allocations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1033-1068, December.
    15. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
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    Cited by:

    1. Lalaina Rakotonindrainy, 2014. "Existence of equilibrium in OLG economies with durable goods," Post-Print halshs-01021382, HAL.

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    More about this item

    Keywords

    Overlapping generation model; increasing returns to scale; loss-free pricing rules; equilibrium; existence;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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