On variational stability in competitive economies (Q1332542)

The aim of the paper is to extend and complement the results of Lucchetti and Patrone (1986) focusing on the stability of supply, demand and equilibria in perfectly competitive economies. Applying set-valued, convex analysis the conditions under which individual and aggregate market behavior constitute graph convergent correspondences, are identified. After the introduction the paper starts out by recalling some key concepts from convex analysis and convergence theory. In Section 3, the behavior of a single firm endowed with a fixed technology and seeking to maximize its profit for the exogenously given and fixed non-negative price vector is analyzed. Section 4 deals with a representative consumer maximizing its proper concave use utility function subject to the linear budget constraints. The objective of these sections is to explore stability of individual supply and demand. Thereafter, the results obtained for single agents are synthesized into a general equilibrium analysis (Section 5). Section 6 concludes by pointing out some possible extensions.