Walras Equilibrium with Coordination

Abstract

We consider a pure exchange economy with private ownership in which consumers have interdependent preferences. Hence, consumers’ preferences are defined on the states of the economy. In a Walras equilibrium for such an economy, it may, of course, be possible for two or more consumers to simultaneously change their net trades and thereby obtain a preferred state. We use the concept of coordination introduced by Vind (1983) to define an exogenously given coordination structure in the economy and define a new equilibrium concept, Walras equilibrium with coordination. In such an equilibrium individual consumers take prices and initial endowments as given, and consumers do not expect to be able to obtain a preferred state when they coordinate their choice of net trades. By using the existence theorem for an equilibrium in a social system with coordination, we set conditions for the existence of a Walras equilibrium with coordination.