Existence of competitive equilibrium when incomes may be zero (*)

John Whittaker, H. Abraham and D. R. Smart
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H. Abraham: Department of Economics, University of Cape Town, Rondebosch 7700, SOUTH AFRICA
D. R. Smart: Department of Mathematics, University of Cape Town, Rondebosch 7700, SOUTH AFRICA

Economic Theory, 1996, vol. 8, issue 1, 177-182

Abstract: In a pure exchange economy, there exists a price vector which is a quasi-equilibrium (Debreu 1962), but this may not be a competitive equilibrium if some individuals' demand functions are discontinuous because their incomes may be zero. We show nonetheless, in a pure exchange economy with free disposal, that there is a sequence of prices approaching the quasi-equilibrium along which total excess demands tend to a non-positive limit.

Date: 1996
Note: Received: August 25, 1994; revised version May 9, 1995
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