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On the regularity of smooth production economies with externalities: competitive equilibrium à la Nash

Elena del Mercato () and Vincenzo Platino ()

Economic Theory, 2017, vol. 63, issue 1, No 12, 287-307

Abstract: Abstract We consider a general equilibrium model of a private ownership economy with consumption and production externalities. The choices of all agents (households and firms) may affect utility functions and production technologies. The allocation of a competitive equilibrium is a Nash equilibrium. We provide an example showing that, under standard assumptions, competitive equilibria are indeterminate in an open set of the household’s endowments. Next, we consider a new version of this model, with firms’ endowments in the spirit of Geanakoplos et al. (J Math Econ 19:113–151, 1990). In our model, firms’ endowments impact the technologies of the other firms. We then prove that, generically in the space of endowments of households and firms, each economy has a finite number of competitive equilibria and each competitive equilibrium is locally a differentiable map of the fundamental parameters.

Keywords: Externalities; Production economies; Competitive equilibrium; Nash equilibrium; Regular economies (search for similar items in EconPapers)
JEL-codes: C62 D51 D62 (search for similar items in EconPapers)
Date: 2017
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Working Paper: On the regularity of smooth production economies with externalities: Competitive equilibrium à la Nash (2017)
Working Paper: On the regularity of smooth production economies with externalities: Competitive equilibrium à la Nash (2016) Downloads
Working Paper: On the regularity of smooth production economies with externalities: Competitive equilibrium à la Nash (2015) Downloads
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DOI: 10.1007/s00199-016-1029-5

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