Is There a Walrasian Equilibrium in Exchange Markets with Endowment Effect

21 Pages Posted: 8 Apr 2009

See all articles by Christian Schwarz

Christian Schwarz

University of Applied Sciences Duesseldorf

Uwe Stroinski

Dr. Stroinski Coaching

Date Written: January 1, 2009

Abstract

We provide an axiomatic framework for exchange markets with a willingness-to-pay/willingness-to-accept discrepancy. First, we obtain a two parameter family of market invariants under price-scaling representing the excess demand. One of the parameters can be identified as endowment. The other is a new feature, called demand-supply gap, that leads to classical general equilibrium if zero. Second, we provide representations of price and demand as unbounded operators on an infinite dimensional Hilbert space. We prove that neither can this space be finite dimensional nor can these operators be bounded. Third, if the demand-supply gap is not zero we obtain that price and demand are not simultaneously sharply measurable and consequently a Walrasian equilibrium does not exist.

Keywords: General equilibrium theory, endowment effect, non-existence of equilibrium

JEL Classification: D50, D51, D01, D03

Suggested Citation

Schwarz, Christian and Stroinski, Uwe, Is There a Walrasian Equilibrium in Exchange Markets with Endowment Effect (January 1, 2009). Ruhr Economic Paper No. 82, Available at SSRN: https://ssrn.com/abstract=1374422 or http://dx.doi.org/10.2139/ssrn.1374422

Christian Schwarz (Contact Author)

University of Applied Sciences Duesseldorf ( email )

Münsterstraße
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Düsseldorf, 40476
Germany

HOME PAGE: http://https://wiwi.hs-duesseldorf.de/personen/christian.schwarz/Seiten/default.aspx

Uwe Stroinski

Dr. Stroinski Coaching ( email )

Germany

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