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The Equilibrium Existence Duality: Equilibrium with Indivisibilities & Income Effects

Elizabeth Baldwin (), Paul Klemperer (), Alex Teytelboym and Omer Edhan Ravi Jagadeesan

No 912, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We show that, with indivisible goods,the existence of competitive equilibrium fundamentally depends on agents’substitution effects, not their income effects. Our Equilibrium ExistenceDuality allows us to transport results on the existence of competitiveequilibrium from settings with transferable utility to settings with incomeeffects. One consequence is that netsubstitutability—which is a strictlyweaker condition than gross substitutability—is sufficient for the existence ofcompetitive equilibrium. We also extend the “demand types†classification ofvaluations to settings with income effects and give necessary and sufficientconditions for a pattern of substitution effects to guarantee the existence ofcompetitive equilibrium.

JEL-codes: C62 D11 D44 (search for similar items in EconPapers)
Date: 2020-06-17
New Economics Papers: this item is included in nep-mic and nep-upt
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Working Paper: The Equilibrium Existence Duality: Equilibrium with Indivisibilities & Income Effects (2020) Downloads
Working Paper: The Equilibrium Existence Duality: Equilibrium with Indivisibilities & Income Effects (2020) Downloads
Working Paper: The Equilibrium Existence Duality: Equilibrium with Indivisibilities & Income Effects (2020) Downloads
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