English, Article, Journal or magazine article edition: A Credit Mechanism for Selecting a Unique Competitive Equilibrium Cheng-Zhong Qin; Martin Shubik

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Bookmark: http://trove.nla.gov.au/version/91931
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • A Credit Mechanism for Selecting a Unique Competitive Equilibrium
Author
  • Cheng-Zhong Qin
  • Martin Shubik
Physical Description
  • preprint
Notes
  • A credit mechanism is considered that selects a unique competitive equilibrium (CE) of an exchange economy. It is shown that a price normalization calling for a fixed monetary value for the total wealth in the economy and the addition of appropriate default penalties together result in a construction of a simple credit mechanism that selects a unique CE. The selection can be utilized to pick a CE that minimizes the need for trust in trade.
  • Competitive equilibrium, Credit line, Marginal utility of income, IOU, Welfare economics
  • This paper considers a credit mechanism for selecting a unique competitive equilibrium (CE). It is shown that in general there exists a "price-normalizing" bundle, with which the enlargement of the general-equilibrium structure to allow for default subject to appropriate penalties results in a construction of a simple credit mechanism for a credit using society to select a unique CE. With some additional conditions, there exists a common price-normalizing bundle with which any CE can be a unique selection for the credit mechanism with appropriate default penalties. The selection can be utilized to select a CE that minimizes the need for money or credit in trade.
  • RePEc:cdl:ucsbec:02-06
  • We show by an iterated process of price normalization that there generically exists a price-normalizing bundle that determines a credit money, such that the enlargement of the general-equilibrium structure to allow for default subject to an appropriate credit limit and default penalty for each trader results in a construction of a simple mechanism for a credit using society to select a unique competitive equilibrium (CE). With some additional conditions, a common credit money can be applied such that any CE can be a unique selection by the credit mechanism with the appropriate credit limit and default penalties for the traders. This will include a CE with the "minimal cash flow" property. Such CEs are special for the reason that they minimize the need for a "substitute-for-trust" (i.e. money) in trade.
  • Competitive equilibrium, Credit mechanism, Marginal utility of income, IOU, Default penalty, Welfare economics
  • RePEc:cwl:cwldpp:1539rr
Language
  • English
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