 # 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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Item Type: Journal Article, refereed, original work 03 Faculty of Economics > Department of Banking and Finance 03 Faculty of Economics > Department of Business Administration 330 Economics Social Sciences & Humanities > Economics and Econometrics Semi-algebraic preferences, Equilibrium correspondence, Polynomial equations, Gröbner bases, Equilibrium multiplicity English January 2010 21 Jan 2010 21:07 29 Jul 2020 20:49 Elsevier 0022-0531 Green https://doi.org/10.1016/j.jet.2009.10.004 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=976890

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