Competitive and Controlled Price Economies: The Arrow-Debreu Model Revisited

Abstract

In an article entitled ‘A Social Equilibrium Existence Theorem’ by Gerard Debreu [2] and in a subsequent article entitled ‘Existence of an Equilibrium for a Competitive Economy’ by Kenneth Arrow and Gerard Debreu [1], the existence of a competitive equilibrium in a closed economy was examined in terms of the existence of a noncooperative equilibrium point in the sense of Nash [8] in a game related to the closed market model. The apparent motivation of the authors for the use of the noncooperative game model was the mathematical convenience provided by the existence proof for a noncooperative equilibrium point which in this instance could be shown to also be a ‘competitive equilibrium’ point in the economic model they constructed.