A note on the existence of a monetary equilibrium over an infinite horizon

Summary. This note considers an economy with ‘inside money’ that extends over an infinite horizon in the case of certainty. It shows the existence of an equilibrium and the indeterminacy of the overall price level when the supply of balances is set exogenously.Received: 6 November 2003, Revised: 2 September 2004 JEL Classification Numbers: D50, E40, E50.G. Bloise: I am indebted to Jacques Dréze, Leo Ferraris, Cuong Le Van, Luca Panaccione, Herakles Polemarchakis and Pietro Reichlin for the long discussions and their valuable suggestions. I also thank an anonymous referee for her/his advices.     

Experts against adverse selection: A note on the existence of equilibrium with costly appropriable information

The existence of competitive equilibrium in Laffont's (J. Econ. Theory10 (1975)) model of adverse selection with costly information is studied. The existence of an equilibrium with finite prices is demonstrated without unusual restrictions on preferences or the technology of information production. This is made possible by changing the way in which the behaviour of information producing agents is modelled, and allowing for some public information.     

Excess demand functions, equilibrium prices, and existence of equilibrium

Summary. For continuous aggregate excess demand functions of economies, the existing literature (e.g. Sonnenschein (1972, 1973), Mantel (1974), Debreu (1974), Mas-Colell (1977), etc.) achieves a complete characterization only when the functions are defined on special subsets of positive prices. In this paper, we allow the functions to be defined on a larger class of price sets, (allowing, for example the closed unit simplex, including its boundary). Besides characterizing excess demands for a larger class of economies, our extension provides a useful tool for proving other results. It allows us to characterize the equilibrium price set for a larger class of economies. It also permits extending Uzawa's observation (1962), by showing that Brouwer's Fixed-Point Theorem is implied by the Arrow-Debreu Equilibrium Existence Theorem (1954, Theorem I). Received: October 18, 1995; revised version June 28, 1996     

Education,overlapping generations,and the existence of equilibrium

We describe a simple aggregative model, the essential features of which are that individuals are mortal (overlapping generations) and can invest in their own training (human capital). It is shown by example that if expectations are rational then there may be a unique steady state but no competitive path starting away from the steady state.     

A note on risk aversion and multivariate,state-dependent preferences

Within the multivariate, state-dependent utility framework, a full insurance specification of risk aversion places severe restrictions on preferences. In particular, the von Neumann-Morgenstern utility function must be separable, and state-dependent only for consumption of the insured good.     

Poverty,competition, democracy,and ownership: A general equilibrium model with vertical preferences

We consider a general equilibrium model where individuals are simultaneously workers, consumers, and shareholders, with two possible market structures: Monopoly and Duopoly, and two extreme ownership structures: egalitarian and concentrated. Considering three standard poverty indicators, the questions are, whether more competition generates more or less poverty for a given ownership structure; and whether a democratic choice between Monopoly and Duopoly leads to the alternative with less poverty. When the ownership is concentrated, we show that Duopoly generates less poverty than Monopoly and the majority votes for the alternative with less poverty. When the ownership is egalitarian, Duopoly may generate more or less poverty and democratic choice alleviates poverty regarding at least one poverty indicator and worsens poverty regarding at least another one, the three poverty indicators never converging. An empirical study on the effect of competition on poverty supports to some extent our theoretical findings.     

Efficiency and nonlinear pricing in nonconvex environments with externalities: A generalization of the Lindahl equilibrium concept

It is a well-known fact that if damaging externalities occur, nonconvexities will necessarily arise in the underlying economic environment rendering questionable the relevance of standard market approaches to the allocation problem. In response to this state of affairs, we define and study a generalization of the Lindahl Equilibrium concept that allows for nonlinear pricing systems in which the marginal outlay may depend on the quantity purchased. This “Generalized Lindahl Equilibrium” attains local pareto efficiency for its associated allocations and is able to support (in the usual sense) any pareto efficient allocation that satisfies a regularity condition.     

Work costs and nonconvex preferences in the estimation of labor supply models

Works costs have not been adequately handled in labor supply estimation, likely due to their complexity. We show that, if work costs are not accounted for in the budget and time constraints in a structural labor supply model, they will be subsumed into the data generating preferences. Even if underlying preferences over consumption and leisure are convex, the presence of unobservable work costs can make these preferences appear nonconvex. However, we show that, under plausible conditions, policy relevant calculations, such as estimates of the effect of tax changes on labor supply and deadweight loss measures, are not affected by the fact that estimated preferences incorporate work costs.     

Money,income and prices in Latin America: An empirical note

Recent papers by Behrman and Vogel, using a simple monetary model, have provided evidence that the price adjustment mechanism in Latin America is characterized by a lagged response to money supply changes which may seriously impede stabilization efforts. In both studies the response to income changes is also drawn out in time. This note re-examines and expands on this evidence, finding that the model only performs well for the high inflation countries and that in these countries price adjustment for both the money supply and real income appears to be virtually complete within the current year.     

A general existence theorem for equilibrium price dispersions

This paper presents sufficient conditions for the existence of non-degenerate equilibrium price dispersions in economies with sequentially searching consumers. This existence result is obtained by fully utilizing the fixed-point property of equilibrium price dispersions. Compared with the existing literature, the formal framework used in this paper is very general. Consequently, the results of the paper are valid for a large class of economic models.     

Inflation variability between central bank's preferences and the structure of the economy: A note

The current paper seeks to build a theoretical explanation to understand why many central banks failed to reduce inflation variability despite having the desire. The result proves that central bank's preferences are a necessary condition but not sufficient to guarantee lower inflation variability. The structure of the economy and the types of the shocks are significant factors.     

A note on optimal growth and intertemporally dependent preferences

The conjecture by Ryder and Heal that optimal closed orbits exist in a growth model with intertemporal dependent preferences is rigorously proved.     

On the existence of rational expectations equilibrium

We prove a theorem on the existence of rational expectations general economic equilibrium when agents condition on prices as well as on private information, and maximize the expectation of a state-dependent utility function. The key to the result is a new idealization of what it means for a set of empirical distributions to support agents' expectations. This idealization depends on the notion that agents compare their expectations with continuous versions of the random empirical distributions that are generated by the workings of the economy. The existence theorem covers all strictly concave utility functions, arbitrary distributions of the state variable, and situations in which the dimension of the state variable is large relative to the number of commodities.     

A note on the interactions among monetary policy,the tax structure and equilibrium output

The proposition that the level of real income is independent of the money stock, originally discussed by quantity theorists, is currently being debated in terms of the rational expectations hypothesis. In this paper, we consider the interactions among monetary policy, the tax structure, and the supply side of the economy and show a potentially important qualification to this proposition. Further, we argue that the impact of monetary policy on output may be perverse.     

Endogenous distribution and equilibrium growth: a note

Does distributive conflict diminish during the course of economic development? This article outlines a model in which distribution, the tax rate and growth evolve endogenously over time. When voting occurs over a tax on capital, we show that the growth rate is maximized at the political equilibrium in the long run. When voting occurs over a general income tax, we show that the growth rate is maximized at the political equilibrium in both the short and long run. These results suggest that the transitional dynamics of growth models with redistributive politics lead to growth‐maximizing outcomes, as distributive conflict diminishes in the course of development. This implies that the democratic process leads to greater consensus over policy choices, with a perfect convergence of interest across individuals with respect to the tax rate.     

A note on evolutionary stability of Bertrand equilibrium

It is shown that the equilibrium notion of an evolutionary stable strategy (ESS) does have predictive power for standard models of Bertrand competition. This is in contrast to a recent claim by Qin and Stuart (1997). The claim is based on the observation that the solution concept ESS behaves discontinuously when finite (discrete) action games approach an infinite (continuous) action game in the limit. Furthermore, it is argued that from a model-theoretic point of view evolutionary stability in prices (i.e. in the Bertrand model) is quite different from evolutionary stability in quantities (i.e. in the Cournot model).