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Recontracting and Competition

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Abstract

We characterize the set of Walrasian allocations of an economy as the set of allocations which can be supported by abstract equilibria that satisfy a recontracting condition which reflects the idea that agents can freely trade with each other. An alternative (and weaker) recontracting condition characterizes the core. The results are extended to production economies by extending the definition of the recontracting condition to include the possibility of agents to recontract with firms. However, no optimization requirement is imposed on firms. In pure exchange economies, an abstract equilibrium is a feasible allocation and a list of choice sets, one for each agent, that satisfy the following conditions: an agent's choice set is a subset of the commodity space that includes his endowment; and each agent's equilibrium bundle is a maximal element in his choice set, with respect to his preferences. The recontracting condition requires that any agent can buy bundles from any other agent's choice set by ofering the other agent a bundle he prefers to his equilibrium bundle.

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  • Nir Dagan, 1996. "Recontracting and Competition," Economic theory and game theory 013, Nir Dagan, revised Jun 1996.
    • Handle: RePEc:nid:ndagan:013
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    1. Antoni Bosch-Domenech & Shyam Sunder, 2000. "Tracking the Invisible Hand: Convergence of Double Auctions to Competitive Equilibrium," Computational Economics, Springer;Society for Computational Economics, vol. 16(3), pages 257-284, December.
    2. Sala-i-Martin, Xavier X, 1996. "A Positive Theory of Social Security," Journal of Economic Growth, Springer, vol. 1(2), pages 277-304, June.
    3. Thierry Foucault, 1994. "Price formation and order placement strategies in a dynamic order driven market," Economics Working Papers 99, Department of Economics and Business, Universitat Pompeu Fabra.
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    Cited by:

    1. Serrano, Roberto & Volij, Oscar, 1998. "Axiomatizations of neoclassical concepts for economies," Journal of Mathematical Economics, Elsevier, vol. 30(1), pages 87-108, August.
    2. Serrano, Roberto & Volij, Oscar, 2000. "Walrasian Allocations without Price-Taking Behavior," Journal of Economic Theory, Elsevier, vol. 95(1), pages 79-106, November.
    3. Nir Dagan & Roberto Serrano & Oscar Volij, 2000. "Bargaining, coalitions and competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(2), pages 279-296, March.
    4. Lee, Darin, 1998. "A note on the individualistic foundations of the core in economies with asymmetric information," Economics Letters, Elsevier, vol. 61(2), pages 203-208, November.
    5. Korthues, Bernd, 2000. "Characterization of an extended Walrasian concept for open economies," Journal of Mathematical Economics, Elsevier, vol. 33(4), pages 449-461, May.

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