Abstract:

It is a striking fact that different solutions become equivalent in the setting of perfectly competitive economies. We provide an axiomatic approach to this equivalence phenomenon. A solution is viewed as a correspondence which maps each economy to a subset of its individually rational and Pareto-optimal allocations. Four axioms are placed on the correspondence: anonymity, equity, consistency and restricted continuity. It is shown that the axioms categorically determine the Walrasian correspondence. The equivalence of other solutions, such as the core or value allocations, now follows by checkingthat they too satisfy the axioms.

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