Re: GE with discrete commodity space - May 22

Posted by anon_econ on May 22, 2012; 5:46pm
URL: http://discussion-forum.276.s1.nabble.com/GE-with-discrete-commodity-space-May-22-tp7571505p7571624.html

Pareto efficient allocations:
(x11,x12)  (x21,x22)
(0,0)        (2,1)
(0,1)        (2,0)
(1,1)        (1,0)
(2,1)        (0,0)

Competitive equilibrium:
px/py=1. (x11,x12)=(0,1), (x21,x22)=(2,0)
and also 1<px/py<2. (x11,x12)=(1,0), (x21,x22)=(1,1).

The First Welfare Theorem does not hold.