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Existence of Competitive Equilibrium in Piecewise Linear and Concave Exchange Economies and the non-symmetric Nash Bargaining Solution

Somdeb Lahiri (somdeb.lahiri***at***yahoo.co.in)

Abstract: In this paper we show that for concave piecewise linear exchange economies every competitive equilibrium satisfies the property that the competitive allocation is a non-symmetric Nash bargaining solution with weights being the initial income of individual agents evaluated at the equilibrium price vector. We prove the existence of competitive equilibrium for concave piecewise linear exchange economies by obtaining a non-symmetric Nash bargaining solution with weights being defined appropriately. In a later section we provide a simpler proof of the same result using the Brouwer’s fixed point theorem, when all utility functions are linear. In both cases the proofs pivotal step is the concave maximization problem due to Eisenberg and Gale and minor variations of it. We also provide a proof of the same results for economies where agents’ utility functions are concave, continuously differentiable and homogeneous. In this case the main argument revolves around the concave maximization problem due to Eisenberg. Unlike previous results, we do not require all initial endowments to lie on a fixed ray through the origin.

Keywords: existence of competitive equilibrium, piecewise linear concave utility function, linear utility function, concave programming, Nash bargaining solution

Category 1: Applications -- OR and Management Sciences (Finance and Economics )

Category 2: Other Topics (Game Theory )

Citation: School of Petroleum Management, PDPU, P.O. Raisan Gandhinagar- 382007 India.

Download: [PDF]

Entry Submitted: 09/14/2013
Entry Accepted: 09/14/2013
Entry Last Modified: 11/22/2013

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