Journal Articles Economic Theory Year : 2017

On the regularity of smooth production economies with externalities: Competitive equilibrium à la Nash

Abstract

We consider a general equilibrium model of a private ownership economy with consumption and production externalities. The choices of all agents (households and firms) may affect utility functions and production technologies. The allocation of a competitive equilibrium is a Nash equilibrium. We provide an example showing that, under standard assumptions, competitive equilibria are indeterminate in an open set of the household’s endowments. Next, we consider a new version of this model, with firms’ endowments in the spirit of Geanakoplos et al. (J Math Econ 19:113–151, 1990). In our model, firms’ endowments impact the technologies of the other firms. We then prove that, generically in the space of endowments of households and firms, each economy has a finite number of competitive equilibria and each competitive equilibrium is locally a differentiable map of the fundamental parameters.
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Dates and versions

hal-01438970 , version 1 (15-10-2024)

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Elena L. del Mercato, Vincenzo Platino. On the regularity of smooth production economies with externalities: Competitive equilibrium à la Nash. Economic Theory, 2017, 63 (1), pp.287-307. ⟨10.1007/s00199-016-1029-5⟩. ⟨hal-01438970⟩
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