On Perfectly Competitive Economies: Loeb Economies
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An exchange economy consists of a set of economic agents, each of whom is characterized by an endowment of goods and a “preference ordering” over all possible combinations of goods, who engage in the exchange of commodities so as to make themselves as well off as possible. This process of exchange is said to take place under perfect competition if, and only if, no agent is able to influence the terms of trade in other agents1 transactions. If the terms of trade are expressed via prices for the commodities, and if agents1 actions result in “market clearing”, i.e., in equality between the aggregate demand and aggregate supply for each commodity, then a competitive equilibrium is said to exist.
KeywordsMeasure Space Exchange Economy Competitive Equilibrium Internal Mapping Perfect Competition
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