CLASSICAL EQUILIBRIUM WITH INCREASING RETURNS

Antonio Villar

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper analyzes the existence of equilibrium in a market economy with increasing returns to scale. Consumers and firms are modelled as payoff maximizers at given prices within their feasible sets. Firms are to be thought of as created by a set of consurners willing to operate some of the available technological possibilities while, at the same time, providing the required means to enable this. Rational consumers will only be willing to set up firms if they can achieve the maximum profitability attainable. A Classical Equilibrium consists of a price vector and an allocation such that supply equals demand, all active firms are equally profitable, and this is the maximurn profitability attainable at given prices.

Keywords: Classical Equilibrium; Increasing Return; Distributive Sets. (search for similar items in EconPapers)
Pages: 44 pages
Date: 1995-05
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:1995-12

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