Competitive Equilibrium and Pareto-Optimality without Free Disposal

Aldo Montesano

Rivista italiana degli economisti, 2001, issue 1, 3-30

Abstract: Non free-disposal equilibrium is examined mainly using the notion of weak equilibrium (i.e., consumers' budget constraints are equalities by definition). The existence of a competitive equilibrium and its Pareto-optimality are investigated both for a pure-exchange economy and for a production economy. The assumptions for the existence of a weak equilibrium are weaker than the usual assumptions for a strong non free disposal-equilibrium or for a free disposal-equilibrium: in particular, the absence of a satiation consumption is not required nor is the convexity of preferences (weak convexity is sufficient). The weak (strong) Pareto-optimality of a weak equilibrium is demonstrated assuming that all consumers weakly (strongly) dislike smaller nominal wealth (all consumers always weakly dislike smaller nominal wealth in a strong equilibrium, which is always also a weakly Pareto-optimal weak equilibrium).

Date: 2001
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