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Competitive equilibria in semi-algebraic economies


Kubler, Felix; Schmedders, Karl (2010). Competitive equilibria in semi-algebraic economies. Journal of Economic Theory, 145(1):301-330.

Abstract

This paper develops a method to compute the equilibrium correspondence for exchange economies with semi-algebraic preferences. Given a class of semi-algebraic exchange economies parameterized by individual endowments and possibly other exogenous variables such as preference parameters or asset payoffs, there exists a semi-algebraic correspondence that maps parameters to positive numbers such that for generic parameters each competitive equilibrium can be associated with an element of the correspondence and each endogenous variable (i.e. prices and consumptions) is a rational function of that value of the correspondence and the parameters.

This correspondence can be characterized as zeros of a univariate polynomial equation that satisfy additional polynomial inequalities. This polynomial as well as the rational functions that determine equilibrium can be computed using versions of Buchberger's algorithm which is part of most computer algebra systems. The computation is exact whenever the input data (i.e. preference parameters etc.) are rational. Therefore, the result provides theoretical foundations for a systematic analysis of multiplicity in applied general equilibrium.

Abstract

This paper develops a method to compute the equilibrium correspondence for exchange economies with semi-algebraic preferences. Given a class of semi-algebraic exchange economies parameterized by individual endowments and possibly other exogenous variables such as preference parameters or asset payoffs, there exists a semi-algebraic correspondence that maps parameters to positive numbers such that for generic parameters each competitive equilibrium can be associated with an element of the correspondence and each endogenous variable (i.e. prices and consumptions) is a rational function of that value of the correspondence and the parameters.

This correspondence can be characterized as zeros of a univariate polynomial equation that satisfy additional polynomial inequalities. This polynomial as well as the rational functions that determine equilibrium can be computed using versions of Buchberger's algorithm which is part of most computer algebra systems. The computation is exact whenever the input data (i.e. preference parameters etc.) are rational. Therefore, the result provides theoretical foundations for a systematic analysis of multiplicity in applied general equilibrium.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Semi-algebraic preferences; Equilibrium correspondence; Polynomial equations; Gröbner bases; Equilibrium multiplicity
Language:English
Date:January 2010
Deposited On:21 Jan 2010 21:07
Last Modified:05 Apr 2016 13:44
Publisher:Elsevier
ISSN:0022-0531
Publisher DOI:https://doi.org/10.1016/j.jet.2009.10.004
Related URLs:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=976890

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