COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1712 Selecting a Unique Competitive Equilibrium with Default Penalties Cheng-Zhong Qin and Martin Shubik July 2009 The enlargement of the general-equilibrium structure to allow default subject to
penalties results in a construction of a simple mechanism for selecting a unique
competitive equilibrium. We consider economies for which a common credit money can be
applied to uniquely select any competitive equilibrium with suitable default penalties. We
identify two classes of such economies. One consists of economies with utility functions
being homogeneous of degree 1; the other consists of economies with the number of
consumers equal to the number of commodities and traders having quasi-linear utility
functions with respect to different commodities. |
