The Second Welfare Theorem in Nonconvex Economies Revisisted

Bernard Cornet
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Bernard Cornet: Department of Economics, University of Kansas, Lawrence, KS 66045, USA

No 202608, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: This paper extends the Second Welfare Theorem to environments in which the usual convexity and differentiability assumptions are relaxed. Instead, the behavior of consumers and firms are formulated in terms of the marginal pricing rule using a notion of normal cone. The main result establishes that the Second Welfare Theorem continues to hold under non-satiated preferences together with a regularity condition on the economy. This condition is satisfied under standard assumptions such as convexity, free disposal, or monotonicity, either on the preferences of the consumers or on the production sets of the firms, and in particular accommodates production sets with "inward kinks" that were previously ruled out.

Keywords: Welfare theorem; Nonconvexities; Pareto optimum. (search for similar items in EconPapers)
Date: 2026-02
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Persistent link: https://EconPapers.repec.org/RePEc:kan:wpaper:202608

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