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Variational Inequalities and Economic Equilibrium

Variational Inequalities and Economic Equilibrium Variational inequality representations are set up for a general Walrasian model of consumption and production with trading in a market. The variational inequalities are of functional rather than geometric type and therefore are able to accommodate a wider range of utility functions than has been covered satisfactorily in the past. They incorporate Lagrange multipliers for budget constraints, which are shown to lead to an enhanced equilibrium framework with features of collective optimization. Existence of such an enhanced equilibrium is confirmed through a new result about solutions to nonmonotone variational inequalities over bounded domains. Truncation arguments with specific estimates, based on the data in one economic model, are devised to transform the unbounded variational inequality that naturally comes up into a bounded one having the same solutions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Mathematics of Operations Research INFORMS

Variational Inequalities and Economic Equilibrium

19 pages

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Publisher
INFORMS
Copyright
Copyright © INFORMS
Subject
Research Article
ISSN
0364-765X
eISSN
1526-5471
DOI
10.1287/moor.1060.0233
Publisher site
See Article on Publisher Site

Abstract

Variational inequality representations are set up for a general Walrasian model of consumption and production with trading in a market. The variational inequalities are of functional rather than geometric type and therefore are able to accommodate a wider range of utility functions than has been covered satisfactorily in the past. They incorporate Lagrange multipliers for budget constraints, which are shown to lead to an enhanced equilibrium framework with features of collective optimization. Existence of such an enhanced equilibrium is confirmed through a new result about solutions to nonmonotone variational inequalities over bounded domains. Truncation arguments with specific estimates, based on the data in one economic model, are devised to transform the unbounded variational inequality that naturally comes up into a bounded one having the same solutions.

Journal

Mathematics of Operations ResearchINFORMS

Published: Mar 2, 2007

Keywords: Keywords : Walrasian economic equilibrium ; functional variational inequalities ; equilibrium computations ; equilibrium constraints ; complementarity problems

References