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Walrasian Equilibrium Allocation

  • 04-08-2010 01:26AM
    #1
    Monetarist
    Closed Accounts Posts: 1 ✭


    I would appreciate if anyone can confirm the 2 Walrasian Equilibria for the following problem:

    U1(X11,X12) = 2logX11 + logX12
    U2(X21,X22) = min {x21 +1, x22+1}

    e1(1,0) and e2(0,1)

    So I know (p1=2, p2=1, x11 = 2/3, x12=2/3, x21=1/3, x22=1/3) is one Walrasian Equilibrium. Is the other Equilibrium at (p1=1, p2=2, x11 = 1/3, x12=1/3, x21=2/3, x22=2/3)?

    Would greatly appreciate any assistance!


Comments

  • #2
    Économiste Monétaire
    Closed Accounts Posts: 2,208 ✭✭✭Économiste Monétaire


    I don't think the second is a Walrasian equilibrium. An eyeball check would lead me to believe that (with the second price set) there will be excess demand for good 1. Equilibria are characterised by zero excess demand.


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