Equilibrium in a Production Economy

Equilibrium in a Production Economy Consider a closed production-consumption economy with multiple agents and multiple resources. The resources are used to produce the consumption good. The agents derive utility from holding resources as well as consuming the good produced. They aim to maximize their utility while the manager of the production facility aims to maximize profits. With the aid of a representative agent (who has a multivariable utility function) it is shown that an Arrow-Debreu equilibrium exists. In so doing we establish technical results that will be used to solve the stochastic dynamic problem (a case with infinite dimensional commodity space so the General Equilibrium Theory does not apply) elsewhere. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Applied Mathematics and Optimization Springer Journals

Equilibrium in a Production Economy

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Publisher
Springer-Verlag
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Mathematics; Mathematical Methods in Physics; Calculus of Variations and Optimal Control; Optimization; Systems Theory, Control; Numerical and Computational Physics; Theoretical, Mathematical and Computational Physics
ISSN
0095-4616
eISSN
1432-0606
D.O.I.
10.1007/s00245-010-9128-3
Publisher site
See Article on Publisher Site

Abstract

Consider a closed production-consumption economy with multiple agents and multiple resources. The resources are used to produce the consumption good. The agents derive utility from holding resources as well as consuming the good produced. They aim to maximize their utility while the manager of the production facility aims to maximize profits. With the aid of a representative agent (who has a multivariable utility function) it is shown that an Arrow-Debreu equilibrium exists. In so doing we establish technical results that will be used to solve the stochastic dynamic problem (a case with infinite dimensional commodity space so the General Equilibrium Theory does not apply) elsewhere.

Journal

Applied Mathematics and OptimizationSpringer Journals

Published: Jun 1, 2011

References

  • An exact solution for the investment and value of a firm facing uncertainty, adjustment costs, and irreversibility
    Abel, A.B.; Eberly, J.C.

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