IDEAS home Printed from https://ideas.repec.org/p/pre/wpaper/201701.html
   My bibliography  Save this paper

Perturbed Utility and General Equilibrium Analysis

Author

Listed:
  • Wei Ma

    (International Business School Suzhou, Xi'an Jiaotong-Liverpool University, China and Department of Economics, University of Pretoria, South Africa.)

Abstract

We study general equilibrium theory of complete markets in an otherwise standard economy with each household having an additive perturbed utility function. Since this function represents a type of stochastic choice theory, the equilibrium of the corresponding economy is defined to be a price vector that makes its mean expected demand equal its mean endowment. We begin with a study of the economic meaning of this notion, by showing that at any given price vector, there always exists an economy with deterministic utilities whose mean demand is just the mean expected demand of our economy with additive perturbed utilities. We then show the existence of equilibrium, its Pareto inefficiency, and the upper hemi-continuity of the equilibrium set correspondence. Specializing to the case of regular economies, we finally demonstrate that almost every economy is regular and the equilibrium set correspondence in this regular case is continuous and locally constant.

Suggested Citation

  • Wei Ma, 2017. "Perturbed Utility and General Equilibrium Analysis," Working Papers 201701, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201701
    as

    Download full text from publisher

    File URL: http://www.up.ac.za/media/shared/61/WP/wp_2017_01.zp106056.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bhattacharya, Rabindra Nath & Majumdar, Mukul, 1973. "Random exchange economies," Journal of Economic Theory, Elsevier, vol. 6(1), pages 37-67, February.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    3. Hildenbrand, W & Mertens, J F, 1972. "Upper Hemi-Continuity of the Equilibrium-Set Correspondence for Pure Exchange Economies," Econometrica, Econometric Society, vol. 40(1), pages 99-108, January.
    4. Hildenbrand, Werner, 1971. "Random preferences and equilibrium analysis," Journal of Economic Theory, Elsevier, vol. 3(4), pages 414-429, December.
    5. Mas-Colell, Andreu, 1977. "Indivisible commodities and general equilibrium theory," Journal of Economic Theory, Elsevier, vol. 16(2), pages 443-456, December.
    6. Yamazaki, Akira, 1978. "An Equilibrium Existence Theorem without Convexity Assumptions," Econometrica, Econometric Society, vol. 46(3), pages 541-555, May.
    7. Mas-Colell, Andreu, 1977. "Regular, Nonconvex Economies," Econometrica, Econometric Society, vol. 45(6), pages 1387-1407, September.
    8. Drew Fudenberg & Ryota Iijima & Tomasz Strzalecki, 2015. "Stochastic Choice and Revealed Perturbed Utility," Econometrica, Econometric Society, vol. 83, pages 2371-2409, November.
    9. Baucells, Manel & Shapley, Lloyd S., 2008. "Multiperson utility," Games and Economic Behavior, Elsevier, vol. 62(2), pages 329-347, March.
    10. repec:wly:emetrp:v:82:y:2014:i:5:p:1873-1912 is not listed on IDEAS
    11. Faruk Gul & Paulo Natenzon & Wolfgang Pesendorfer, 2014. "Random Choice as Behavioral Optimization," Econometrica, Econometric Society, vol. 82(5), pages 1873-1912, September.
    12. Dierker, Hildegard, 1975. "Smooth preferences and the regularity of equilibria," Journal of Mathematical Economics, Elsevier, vol. 2(1), pages 43-62, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:joreco:v:38:y:2017:i:c:p:34-43 is not listed on IDEAS

    More about this item

    Keywords

    General equilibrium; Stochastic choice; Regular economy;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pre:wpaper:201701. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rangan Gupta). General contact details of provider: http://edirc.repec.org/data/decupza.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.