Journal of Economics

, Volume 106, Issue 2, pp 119–132 | Cite as

Selecting a unique competitive equilibrium with default penalties

Article
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Abstract

The enlargement of the general-equilibrium structure to allow for default subject to penalties results in a construction of a simple mechanism for selecting a unique competitive equilibrium. We consider economies for which a common credit money can be applied to uniquely select each of the competitive equilibria with suitable default penalties. We identify two classes of such economies.

Keywords

Competitive equilibrium Credit mechanism Marginal utility of income Saddle-point characterization Welfare economics 

JEL Classification

D5 C72 E4 
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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.Research Center for Games and Economic BehaviorShandong UniversityJinan CityChina
  2. 2.Department of EconomicsUniversity of CaliforniaSanta BarbaraUSA
  3. 3.Economics DepartmentYale UniversityNew HavenUSA

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