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Pricing in Economies with a Variable Number of Commodities

Listed author(s):
  • Robert P. Gilles

    (Virginia Polytechnic & State University)

  • Dimitrios Diamantaras

    (Temple University)

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

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Paper provided by EconWPA in its series Microeconomics with number 9710002.

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Length: 35 pages
Date of creation: 15 Oct 1997
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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