Existence and Stability of Equilibrium in a Multisectoral Model with Quantity Rationing

Abstract

Sectorspecific measures, particularly for new high-tech firms, are currently of major concern to German economic policy. For an analysis of the effects of such sectorspecific policy measures in the framework of temporary equilibrium theory, however, the theorist misses a suitable model. On the one hand, the totally aggregated macromodel turns out to be too rough, and the totally disaggregated micromodels on the other hand turn out to be too complicated. It is the main purpose of this study to fill in this gap by providing a quantity constrained model on a medium-aggregated level. Our procedure will be to disaggregate the well-known quantity constrained macromodel into several sectors. Our model has the advantage that one can still make use of a two dimensional geometric representation. The paper then addresses the questions of existence and stability of general equilibrium. The existence problem can be reduced to an analytically simple situation. The stability issue will be settled by a natural extension of the familiar macro-quantity tâtonnement process to our multi-sectoral setting.