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Pricing in Economies with a Variable Number of Commodities

Author

Listed:
  • Robert P. Gilles

    (Virginia Polytechnic & State University)

  • Dimitrios Diamantaras

    (Temple University)

Abstract

We present a general equilibrium model that encompasses the endogenous selection of a set of tradeable commodities. At its foundation we introduce the notion of a trade infrastructure as a set of social institutions describing the trade and production technologies available to the agents in the economy. Our model bridges the analyses of economies with a finite number of commodities and those with an infinite number, and it provides a general framework for investigating a very large class of possible applications. We discuss in detail a simple example on the development of a guild economy into a market based economy. We introduce an equilibrium concept that describes the pricing of trade infrastructures, based on the notion of valuation equilibrium for economies with abstract public goods, as in Diamantaras and Gilles (1996, International Economic Review, 37, 851-860). Through this concept we are able to price the tradeability of a commodity by itself. As our main results we obtain the existence as well as the decentralization of Pareto efficient allocations using the concept of valuation equilibrium. JEL classification: D23, D41, D46, D59, D90, H40, O12

Suggested Citation

  • Robert P. Gilles & Dimitrios Diamantaras, 1997. "Pricing in Economies with a Variable Number of Commodities," Microeconomics 9710002, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:9710002
    Note: Type of Document - Adobe Acrobat 3.0 document; prepared on IBM PC/Win 3.11; to print on Any printer Adobe Reader can use; pages: 35 ; figures: None
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    Keywords

    Trading systems infrastructures welfare theorems general equilibrium Public economics;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • D59 - Microeconomics - - General Equilibrium and Disequilibrium - - - Other
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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