Free disposal, monotonicity and equilibrium

Yang, Yi-You (2012): Free disposal, monotonicity and equilibrium.

Abstract

This paper studies the effect of free disposal on the existence of Walrasian equilibrium for exchange economies with indivisible objects. It is shown that allowing an agent to enjoy free disposal has the same effect for generating an equilibrium (or eliminating existing equilibria) as allowing every agent to enjoy free disposal. A new equilibrium existence theorem is given to show how this observation can enhance the existence results by Kelso and Crawford (1982) and Sun and Yang (2006).

• Item Type: MPRA Paper
• Language: English
• Keywords: Indivisibility; equilibrium; free disposal; monotonic cover
• Subjects: D - Microeconomics > D5 - General Equilibrium and Disequilibrium; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D51 - Exchange and Production Economies

References

GUL, F., AND E. STACCHETTI (1999): "Walrasian Equilibrium with Gross Substitutes," Journal of Economic Theory, 87, 95-124.

KELSO, A., AND V.P. CRAWFORD (1982): "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, 50, 1483-1504.

SUN, N., AND Z. YANG (2006): "Equilibria and Indivisibilities: Gross Substitutes and Complements," Econometrica, 74, 1385-1402.