SFB 303 Discussion Paper No. A - 350

Author: Folkertsma, Carsten
Title: On the Structure of Economies with Production
Abstract: The structure of exchange economies is well understood: homogeneity, continuity and Walras' Identity characterize their excess demand functions. Far less is known about the structure of production economies. In this paper it is shown that the excess demand function of a production economy is characterized by the same three properties, if the technology exhibits decreasing returns to scale. The results concerning the case of constant returns to scale are less satisfactory. The question by which properties the excess demand correspondence of an economy with constant returns to scale can be described, is still open. As a first step we consider a class of these economies which can be "reduced" to exchange economies preserving the information about equilibria. For technologies without substitution we show that the excess demand of these reduced economies has no additional properties. The proofs of the results confirm once more the conjecture that the lack of structure in general equilibrium models is mainly due to the way the consumption side is modelled.
Creation-Date: November, 1991
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