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Then
X
L
zl (p )pl pj + max f0; zj (p )g = zl (p )pl + zl (p ) max f0; zl (p )g
j=1
zl (p ) < 0 i pl = 0:
z(p ) = 0:
3.3.1 Uniqueness
Existence of a competitive equilibrium can be proved under quite general con-
ditions.3 Equilibria are however unique only under very strong restrictions.
Several examples of such restrictions are listed in the following.
The endowment distribution is Pareto e cient, and hence the only equilib-
rium is autarchic: xi = ! i for all i 2 I:
Note that gross substitution implies that the law of demand holds at
any equilibrium price. Gross substitution holds for instance for Cobb
Douglas and CES utility functions (provided < 1).
z(p; !) ! +1 as p ! 0
z(p; !) ! L as p ! 1:
26 CHAPTER 3. ARROW-DEBREU EXCHANGE ECONOMIES
4
This is a consequence of the boundary conditions of excess demand systems. In other
words, we could adopt the alternative normalization, restricting prices in the simplex ;
a compact set, and show that equilibrium prices are never on @ :
5
Along a component of Z 1 (0) (a line or a circle), a change in index occurs when the
manifold folds.