General Equilibrium price taking(伦敦经济学院高级微观讲义).ppt

General Equilibrium: price taking Some puzzles in competitive equilibrium analysis The situation from Alfs point of view Alfs offer curve ...as an Australian Bills offer curve Given competitive behaviour, the CE is the only consistent allocation So where do the prices come from? A fresh approach The idea of blocking: a little story A formal approach In a 2-person world there are very few coalitions possible The competitive equilibrium again A simple result The extremes of the 2-person core So lets clone the economy All the old coalitions are possible... How the blocking coalition works If N is bigger there may be more blocking coalitions The only allocation left in the 2N-person core (eventually)... A powerful result: the shrinking core * Microeconomics So far weve focused on competitive equilibrium analysis. But why? Why concentrate on equilibrium? Why assume competitive behaviour? Lets start by having another look at the exchange economy. Well redraw the Edgeworth box D E O a x 2 a x 1 a D E x 1 a x 2 a x 1 b O b O a D E x 2 b x 1 b O b Lets look at the inner workings... x1a R1a R2a x2a Oa x1a R1a R2a x2a Oa What about Bill? x1b R1b R2b x2b Ob x1b R1b R2b x2b Ob How Bill responds as p1/p2 changes... x1b R1b R2b x2b Ob The two offer curves 1 x2b Ob x1a x2a Oa x1b R1b R1a R2a R2b E D equilibrium here But why competitive behaviour? Why should Alf and Bill behave that way? Where do the prices come from? subject to h h S pixi ￡ M i=1 U (x ) max n h h S pixi ￡ M We need a more general solution concept Then examine how price-taking equilibrium relates to this. Lets develop the approach for the exchange economy, though it could apply to more interesting economies. ...as n separate individuals One day you take your bundle along to the swap shop... ...and some bossy person is there who proposes (insists on?) a particular feasible allocation. You and some others dont like the