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Walrasian prices in markets with tradable rights

Author

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  • Carlos Hervés-Beloso
  • Francisco Martínez
  • Jorge Rivera

Abstract

In this pape,r we consider an exchange economy where there is an external restriction for the consumption of goods. This restriction is defined by both, a cap on consumption of certain commodities and the requirement of an amount of rights for the consumption of these commodities. The caps for consumption are imposed exogenously due to the negative effects that the consumption may produce. The consumption rights or licences are distributed among the agents. This fact leads to the possibility of establishing licence markets. These licences do not participate in agents’ preferences, however the individual’s budgetary constraint may be modified, leading to a reassignment of resources. Our aim is to show the existence of a Walrasian equilibrium price system linking tradable rights prices with commodity prices.
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Suggested Citation

  • Carlos Hervés-Beloso & Francisco Martínez & Jorge Rivera, 2012. "Walrasian prices in markets with tradable rights," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(2), pages 497-512, February.
    • Handle: RePEc:spr:joecth:v:49:y:2012:i:2:p:497-512
    DOI: 10.1007/s00199-011-0635-5
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    Cited by:

    1. Graciela Chichilnisky, 2012. "Economic theory and the global environment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(2), pages 217-225, February.
    2. Carlos Hervés-Beloso & Emma Moreno-García, 2022. "Revisiting the Coase theorem," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(2), pages 421-438, April.
    3. Graziano, Maria Gabriella & Meo, Claudia & Yannelis, Nicholas C., 2017. "Stable sets for exchange economies with interdependent preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 140(C), pages 267-286.
    4. Carlos Hervés-Beloso & Francisco Martínez-Concha, 2023. "Coasian rights in a cap-and-trade mechanism with damage compensations," European Journal of Law and Economics, Springer, vol. 56(3), pages 425-441, December.

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    More about this item

    Keywords

    Competitive equilibrium; Tradable licenses; Consumption rights; Externalities; Cap-and-trade program; D51; D62; Q52;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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