Template-type: ReDIF-Paper 1.0
Author-Name: Elizabeth Badlwin
Author-Workplace-Name: Dept of Economics and Hertford College, University of Oxford
Author-Email: elizabeth.baldwin@economics.ox.ac.uk.
Author-Name: Omer Edhan
Author-Workplace-Name: Department of Economics, University of Manchester 
Author-Email: omer.edhan@gmail.com  
Author-Name: Ravi Jagadeesan
Author-Workplace-Name: Harvard Business School and Department of Economics, Harvard University 
Author-Email: ravi.jagadeesan@gmail.com
Author-Name: Paul Klemperer
Author-Workplace-Name: Department of Economics and Nuffield College, University of Oxford 
Author-Email:  paul.klemperer@nuffield.ox.ac.uk 
Author-Name: Alexander Teytelboym
Author-Workplace-Name: Department of Economics, Institute for New Economic Thinking, and St. Catherine’s College, University of Oxford
Author-Email: alexander.teytelboym@economics.ox.ac.uk
Title: The Equilibrium Existence Duality: Equilibrium with Indivisibilities & Income Effects
Abstract: We show that, with indivisible goods, the existence of competitive equilibrium fundamentally depends on agents’ substitution effects, not their income effects.
Our Equilibrium Existence Duality allows us to transport results on the existence of
competitive equilibrium from settings with transferable utility to settings with income
effects. One consequence is that net substitutability—which is a strictly weaker condition than gross substitutability—is sufficient for the existence of competitive equilibrium.
We also extend the “demand types” classification of valuations to settings with income
effects and give necessary and sufficient conditions for a pattern of substitution effects
to guarantee the existence of competitive equilibrium.
JEL codes: C62, D11, D44
Length: 49 pages
Creation-Date: 2020-07-01
Number: 2020-W08
File-URL: https://www.nuffield.ox.ac.uk/economics/Papers/2020/2020W08_Equilibrium-Existence-Duality.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:2008