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  • The Theory of General Equilibrium

    Jean-Marc Bonnisseau & Elena L. del Mercato

    Masters M2 APE & MMMEF

    Course in English - First Semester 2016/2017

    General Presentation

    The general economic equilibrium theory studies the interactions among heterogeneous agents on commodity and financial markets. The course focuses on the classical Arrow-Debreu model and the main properties of a competitive equilibrium (existence, efficiency, local uniqueness, structure of the equilibrium set). The course is a necessary step to handle advanced questions arising from financial markets and markets imperfections, such as externalities, imperfect competition or increasing returns to scale.

    Key words: equilibrium, competition, optimality, existence, sensitivity.

    Class: Every Friday, 9:00 - 12:00 - Room A2 - Rez de chaussée BATIMENT A - PSE Campus Jourdan, 48 Boulevard Jourdan, 75014 Paris

    Evaluation: Homeworks and Final Exam.

    • Course Content

      1. Overview of an equilibrium model. The model of an Arrow-Debreu economy.
      2. The consumer. Preferences, demand function, indirect utility function, compensated demand, properties of the demand, Walras law.
      3. The producer. Production set, competitive behavior, competitive supply, properties of the supply function.
      4. Walras equilibrium, wealth and initial endowments, equilibrium in an exchange economy, first properties.
      5. Profit sharing rules, equilibrium of a production economy, existence of equilibria by simultaneous optimization.
      6. Pareto optima, the two theorems of welfare economics.
      7. A differentiable approach. Regular utility functions, properties of the Marshallian and the Hicksian demands. Generalized Slutsky equations.
      8. Differential characterization of equilibria. Regular economies, properties, finiteness of the number of equilibria, differentiable selections of the equilibrium price, genericity.
      9. Structure of the Pareto optima, no-trade equilibrium and Pareto optima, uniqueness of equilibrium.

      Bibliography

      * Balasko Y., Foundations of the Theory of General Equilibrium, Academic Press (1988)

      * Debreu G., Theory of value, Cowles Foundation Monographs Series (1959)

      * Florenzano M., General Equilibrium Analysis: Existence and Optimality Properties of Equilibria, Springer (2005)

      * Mas-Colell, A., The Theory of General Economic Equilibrium: A Differentiable Approach, Cambridge University Press, Cambridge, UK (1985).

      * Mas-Colell, A., Whinston, M.D., and Green, J.R., Microeconomic Theory, Oxford University Press (1995).

      * Villanacci, A., Carosi, L., Benevieri, P., Battinelli, A., Differential Topology and General Equilibrium with Complete and Incomplete Markets, Kluwer Academic Publishers (2002)