Existence of marginal pricing equilibria in economies with externalities and non-convexities

We consider a general equilibrium model with externalities and non-convexities in production. The consumption sets, the preferences of the consumers and the production possibilities are represented by set-valued mappings to take into account possibility of external effects. There is no convexity assumption on the correspondences of production. We propose a definition of the marginal pricing rule, which generalizes the one used in the model without externality and, which satisfies a continuity assumption with respect to the external effect.We prove the existence of general equilibria under assumptions which allow us to encompass together the works on economies with externalities and convex conditional production sets, and those on marginal pricing equilibria in economies without externalities. We provide examples to illustrate the definition of the marginal pricing rule and to show the difference with the standard case.     

A general equilibrium model with external scale economies in production

A general-equilibrium model of an urban economy is described. The standard residential land use model is extended to include a well-defined production/employment sector. External scale economies occur in the production of the city's export good. The model is designed for the numerical computation of equilibria and optima.     

Existence of competitive equilibrium under financial constraints and increasing returns

This paper studies a ‘factor cost in advance’ model with increasing returns in production. In the model both partial equilibrium and general equilibrium may exist since working capital of firms limit their input demand. We provide a sufficient condition for the existence of partial equilibrium of a firm operating on a non-convex choice set. Furthermore we establish the existence and uniqueness of competitive equilibrium in the special case of logarithmic utility.     

Alternative functional forms for production,cost and returns to scale functions

We consider generalized production functions, introduced in Zellner and Revankar (1969), for output y=g(f) where g is a monotonic function and f is a homogeneous production function. For various choices of the scale elasticity or returns to scale as a function of output, differential equations are solved to determine the associated forms of the monotonic transformation, g(f). Then by choice of the form of f, the elasticity of substitution, constant or variable, is determined. In this way, we have produced and generalized a number of homothetic production functions, some already in the literature. Also, we have derived and studied their associated cost functions to determine how their shapes are affected by various choices of the scale elasticity and substitution elasticity functions. In general, we require that the returns to scale function be a monotonically decreasing function of output and that associated average cost functions be U- or L-shaped with a unique minimum. We also represent production functions in polar coordinates and show how this representation simplifies study of production functions' properties. Using data for the US transportation equipment industry, maximum likelihood and Bayesian methods are employed to estimate many different generalized production functions and their associated average cost functions. In accord with results in the literature, it is found that the scale elasticities decline with output and that average cost curves are U- or L-shaped with unique minima. © 1998 John Wiley & Sons, Ltd.     

Equitable nature of core allocations in atomless economies

The purpose of this paper is to prove the equal treatment property for the -core allocations of an atomless economy without any condition on the data of economy. This result prompts the same property for the core allocations. Received: 7 March 1995 / Accepted: 3 March 1997     

Equilibrium allocations of endowment-pretension games in public good economies

In a public good economy where agents' preferences are known but endowments are private information, instituting an allocation rule and asking the agents their initial endowments induces an endowment-pretension game. We analyse the Nash equilibrium allocations of this game and discuss its welfare properties with reference to voluntary contributions allocations. Received: 30 May 2001, Accepted: 23 September 2005 JEL Classification: H41 I am grateful to Murat Sertel for his continuous support and encouragement; to G?ksel Asan and Arunava Sen for their invaluable help. I would also like to thank Fikret Adaman, Ahmet Alkan, Salvador Barberá, Semih Koray, Andrei Ratiu, Muhamet Yíldíz, ünal Zenginobuz, an Associate Editor and two referees of the Review of Economic Design for their enlightening comments on previous drafts. Earlier versions of this paper were written during my stay at Universitat Autónoma de Barcelona and at the Indian Statistical Institute. Both visits have been possible by the kindness of the host institutions and the financial support of the Turkish Academy of Sciences and Serem Ltd. It is a pleasure for me to express my gratitude to all these institutions. Of course, all possible errors are mine.     

Evaluating cost efficiency and returns to scale in the Life Insurance Corporation of India using data envelopment analysis

This paper applies a new variant of data envelopment analysis model to examine the performance of Life Insurance Corporation (LIC) of India. The findings show a significant heterogeneity in the cost efficiency scores over the course of 19 years. A decline in performance after 1994-1995 can be taken as evidence of increasing allocative inefficiencies arising from the huge initial fixed cost undertaken by LIC in modernizing its operations. A significant increase in cost efficiency in 2000-2001 is, however, cause for optimism that LIC may now be realizing a benefit from such modernization. This will stand them in good stead in terms of future competition. Results from a sensitivity analysis are in broad agreement with the main findings of this study.     

Decomposing TFP growth in the presence of cost inefficiency,nonconstant returns to scale,and technological progress

A thorough understanding of changes in productivity measures is important to economists and policymakers, because productivity growth is a major source of economic growth. This article explores the relationship between changes in total factor productivity (TFP) growth, defined using an index number approach, and changes in returns to scale, cost efficiency, and technology. Several decompositions are developed, using alternatively production and cost frontiers. The last decomposition developed also allows for multiple outputs.The refereeing process of this paper was handled through W.H. Greene.     

Arbitrage and equilibrium in unbounded exchange economies with satiation

In his seminal paper on arbitrage and competitive equilibrium in unbounded exchange economies, Werner (1987) proved the existence of a competitive equilibrium, under a price no-arbitrage condition, without assuming either local or global nonsatiation. Werner’s existence result contrasts sharply with classical existence results for bounded exchange economies which require, at minimum, global nonsatiation at rational allocations. Why do unbounded exchange economies admit existence without local or global nonsatiation? This question is the focus of our paper. First, we show that in unbounded exchange economies, even if some agents’ preferences are satiated, the absence of arbitrage is sufficient for the existence of competitive equilibria, as long as each agent who is satiated has a nonempty set of useful net trades– that is, as long as agents’ preferences satisfy weak nonsatiation. Second, we provide a new approach to proving existence in unbounded exchange economies. The key step in our new approach is to transform the original economy to an economy satisfying global nonsatiation such that all equilibria of the transformed economy are equilibria of the original economy. What our approach makes clear is that it is precisely the condition of weak nonsatiation – a condition considerably weaker than local or global nonsatiation – that makes possible this transformation.     

Arbitrage and equilibrium in economies with infinitely many commodities

An ‘arbitrage opportunity’ for a class of agents is a commodity bundle that will increase the utility of any of the agents and that has non-positive price. The non-existence of ‘arbitrage opportunities’ is necessary and sufficient for the existence of an economic equilibrium. A bundle is ‘priced by arbitrage’ if there is a unique price that it can command without causing an ‘arbitrage opportunity’ to exist. For economies that have infinitely many commodities, appropriate notions of ‘arbitrage opportunities’ and ‘bundles priced by arbitrage’ depend on the continuity of agents’ preferences. This paper develops these notions, thereby providing a foundation for recent work in financial theory concerning arbitrage in continuous-time models of securities markets.     

Scope and scale economies in merging hospitals prior to merger

During the 1980s, the impact of the Prospective Payment System and increased pressure from payers for discounts placed pressure on hospitals to become more efficient. An increase in the number of hospital mergers during this period suggests that merger was a strategy used by hospitals to improve efficiency. This hypothesis is tested by estimating multiproduct scope and scale economies in merging hospitals one year prior to the merger and comparing these with a group of controls using estimates from a hybrid translog cost function. Diseconomies of scale were present when the estimated hybrid translog cost function is evaluated at variable means. The results suggest that merging hospitals could obtain operational efficiencies through merger.     

Nonparametric analysis of returns to scale in the US hospital industry

This paper presents new estimates of scale economies for US hospitals. We show that the common translog specification of hospital costs is a misspecification, and employ nonparametric, local linear estimation with both continuous and discrete covariates. A bootstrap method is used to provide inferences regarding ray scale economies and expansion path scale economies for a large sample of hospitals covering 1984–1996. We find evidence of changes in the structure of hospital costs over the sample period, as well as evidence of locally optimal hospital sizes. Copyright © 2004 John Wiley & Sons, Ltd.     

On the existence of walrasian equilibrium in large-square economies

An existence theorem for Walrasian equilibrium is demonstrated for an economy with a continuum of consumers and an infinite-dimensional commodity space, such as l₁ or c₀, having an ‘order-compatible’ basis.     

A note on the equilibrium theory of economies with asymmetric information

In this note, we give an equilibrium existence theorem for exchange economies with asymmetric information and with an infinite dimensional commodity space. In our model, we assume that preferences are represented by well behaved utility functions, the positive cone has a non empty interior and the individual rational utility set is compact. Our result complements the corresponding one in Podczeck and Yannelis (2008), in the sense that is applicable to commodity spaces in which the order intervals are (possibly) not compact with respect to any Hausdorff linear topology.     

The evolution of scale economies in US banking

Continued consolidation of the US banking industry and a general increase in the size of banks have prompted some policymakers to consider policies that discourage banks from getting larger, including explicit caps on bank size. However, limits on the size of banks could entail economic costs if they prevent banks from achieving economies of scale. This paper presents new estimates of returns to scale for US banks based on nonparametric, local‐linear estimation of bank cost, revenue, and profit functions. We report estimates for both 2006 and 2015 to compare returns to scale some 7 years after the financial crisis and 5 years after enactment of the Dodd–Frank Act with returns to scale before the crisis. We find that a high percentage of banks faced increasing returns to scale in cost in both years, including most of the 10 largest bank holding companies. Also, while returns to scale in revenue and profit vary more across banks, we find evidence that the largest four banks operate under increasing returns to scale.