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(2015)
THE AMERICAN ECONOMIC REVIEW AugusT
E. Baldwin, P. Klemperer (2014)
TROPICAL GEOMETRY TO ANALYSE DEMAND
Abstract We propose a new abstract definition of equilibrium in the spirit of competitive equilibrium: a profile of alternatives and a public ordering (expressing prestige, price, or a social norm) such that each agent prefers his assigned alternative to all lower-ranked ones. The equilibrium operates in an abstract setting built upon a concept of convexity borrowed from convex geometry. We apply the concept to a variety of convex economies and relate it to Pareto optimality. The “magic” of linear equilibrium prices is put into perspective by establishing an analogy between linear functions in the standard convexity and “primitive orderings” in the abstract convexity. (JEL I11, I18, J44, K13 )
American Economic Review – American Economic Association
Published: Aug 1, 2015
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