Bertrand-Edgeworth Equilibria in Finite Exchange Economies

Abstract

We introduce a framework for analyzing Bertrand-Edgeworth equilibria in finite Arrow-Debreu exchange economies. A key feature is the way trade takes place. There are two main stages. In the first stage agents simultaneously choose prices and quantities of commodities they want to sell; in the second stage they enter the markets as buyers, sequentially, and choose quantities of commodities they want to buy. We view the framework as providing a realistic, entirely decentralized abstraction of how trade occurs on numerous markets, especially for consumer goods and services, and show that resulting equilibria are Walrasian if and only if initial endowments are already Pareto efficient allocations. Many examples are also considered.

JEL Classification: C72, C73, D43, D51, D61