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Type Journal Article
Scope Discipline-based scholarship
Title Competitive equilibria in semi-algebraic economies
Organization Unit
Authors
  • Felix Kübler
  • Karl Schmedders
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Journal of Economic Theory
Publisher Elsevier
Geographical Reach international
ISSN 0022-0531
Volume 145
Number 1
Page Range 301 - 330
Date 2010
Abstract Text 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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Digital Object Identifier 10.1016/j.jet.2009.10.004
Other Identification Number merlin-id:444
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Keywords Semi-algebraic preferences, Equilibrium correspondence, Polynomial equations, Gröbner bases, Equilibrium multiplicity