General equilibrium and social choice with increasing returns
For any intransitive community preference, we construct a non-convex economy where all the marginal cost pricing general equilibria are Pareto inefficient (theorem 3.2). The result is valid without requiring a fixed income distribution rule (corollary 3.3). Intransitive community preferences are a frequent occurrence (theorem 3.1): necessary and sufficient conditions for transitivity of the community preference fail in a set which is open and dense in the space of individual preferences with a standard topology.
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"On a general existence theorem for marginal cost pricing equilibria,"
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- Guesnerie, Roger, 1975. "Pareto Optimality in Non-Convex Economies," Econometrica, Econometric Society, vol. 43(1), pages 1-29, January.
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