Quadratic Concavity and Determinacy of Equilibrium

Posted: 17 Aug 2002

See all articles by Chris Shannon

Chris Shannon

University of California, Berkeley - Department of Economics

William R. Zame

University of California, Los Angeles (UCLA) - Department of Economics

Abstract

One of the central features of classical models of competitive markets is the generic determinacy of competitive equilibria. For smooth economies with a finite number of commodities and a finite number of consumers, almost all initial endowments admit only a finite number of competitive equilibria, and these equilibria vary (locally) smoothly with endowments; thus equilibrium comparative statics are locally determinate. This paper establishes parallel results for economies with finitely many consumers and infinitely many commodities. The most important new condition we introduce, quadratic concavity, rules out preferences in which goods are perfect substitutes globally, locally, or asymptotically. Our framework is sufficiently general to encompass many of the models that have proved important in the study of continuous-time trading in financial markets, trading over an infinite time horizon, and trading of finely differentiated commodities.

Suggested Citation

Shannon, Chris and Zame, William R., Quadratic Concavity and Determinacy of Equilibrium. Econometrica, Vol. 70, pp. 631-662, 2002. Available at SSRN: https://ssrn.com/abstract=312253

Chris Shannon (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

William R. Zame

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States
310-206-9463 (Phone)

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