Existence of Equilibria in Economies with Externalities and Nonconvexities

We consider a general equilibrium model of an economy in which the production possibilities, the consumption sets and the preferences of the consumers are represented by set-valued mappings which depend on the environment to take into account the possibility of external effect. In order to encompass all kinds of nonconvexities, we do not put any convexity assumption either on the graph of the set-valued mapping which describes the technological possibilities or on the production set for a given environment. The firms are instructed to set their prices according to general pricing rules which may depend on the production plans of other producers and on consumption plans. We report an existence result of general equilibria. As in the model without external effects, the key hypotheses are bounded loss and survival assumptions. Nevertheless, we also assume that the set-valued mappings which describe the fundamentals of the economy are lower semi-continuous and have a closed graph. Our framework is sufficiently large to generalize previous works on the existence of competitive equilibria with externalities when the firms have convex production sets and on the existence of equilibria with general pricing rule without externality.