Arrow–Debreu model

{{blockquote|The contents of both theorems [fundamental theorems of welfare economics] are old beliefs in economics. Arrow and Debreu have recently treated this question with techniques permitting proofs.|Gérard Debreu|Valuation equilibrium and Pareto optimum (1954)|source=}}{{blockquote|This statement is precisely correct; once there were beliefs, now there was knowledge.

The Arrow-Debreu model, as communicated in the Theory of Value, changed basic thinking and quickly became the standard model of price theory. It is the "benchmark” model in Finance, International Trade, Public Finance, Transportation, and even macroeconomics... In rather short order, it was no longer "as it is" in Marshall, Hicks, and Samuelson; rather, it became "as it is" in Theory of Value.|Hugo Sonnenschein|remarks at the Debreu conference, Berkeley, 2005|source=}}

This section follows the presentation in,{{Cite book |last=Starr |first=Ross M. |title=General Equilibrium Theory: An Introduction |publisher=Cambridge University Press |year=2011 |isbn=978-0521533867 |edition=2 |pages= |at=}} which is based on.Arrow, K. J. (1962). "Lectures on the theory of competitive equilibrium." Unpublished notes of lectures presented at Northwestern University.

The Arrow–Debreu model models an economy as a combination of three kinds of agents: the households, the producers, and the market. The households and producers transact with the market but not with each other directly.

The households possess endowments (bundles of commodities they begin with), one may think of as "inheritance." For mathematical clarity, all households must sell all their endowment to the market at the beginning. If they wish to retain some of the endowments, they would have to repurchase them from the market later. The endowments may be working hours, land use, tons of corn, etc.

The households possess proportional ownerships of producers, which can be thought of as joint-stock companies. The profit made by producer $j$ is divided among the households in proportion to how much stock each household holds for the producer $j$. Ownership is imposed initially, and the households may not sell, buy, create, or discard them.

The households receive a budget, income from selling endowments, and dividend from producer profits. The households possess preferences over bundles of commodities, which, under the assumptions given, makes them utility maximizers. The households choose the consumption plan with the highest utility they can afford using their budget.

The producers can transform bundles of commodities into other bundles of commodities. The producers have no separate utility functions. Instead, they are all purely profit maximizers.

The market is only capable of "choosing" a market price vector, which is a list of prices for each commodity, which every producer and household takes (there is no bargaining behavior—every producer and household is a price taker). The market has no utility or profit. Instead, the market aims to choose a market price vector such that, even though each household and producer is maximizing their utility and profit, their consumption and production plans "harmonize." That is, "the market clears". In other words, the market is playing the role of a "Walrasian auctioneer."

In general, we write indices of agents as superscripts and vector coordinate indices as subscripts.

• $x\; \backslash succeq\; y$ if $\backslash forall\; n,\; x\_n\; \backslash geq\; y\_n$
• $\backslash R^N\_+$ is the set of $x$ such that $x\; \backslash succeq\; 0$
• $\backslash R\_\{++\}^N$ is the set of $x$ such that $x\; \backslash succ\; 0$
• $\backslash Delta\_N\; =\; \backslash left\backslash \{x\backslash in\; \backslash R^N:\; x\_1,\; ...,\; x\_N\; \backslash geq\; 0,\; \backslash sum\_\{n\backslash in\; 1:N\}\; x\_n\; =\; 1\backslash right\backslash \}$ is the N-simplex. We often call it the price simplex since we sometimes scale the price vector to lie on it.

• The commodities are indexed as $n\backslash in\; 1:N$. Here $N$ is the number of commodities in the economy. It is a finite number.
• The price vector $p\; =\; (p\_1,\; ...,\; p\_N)\; \backslash in\; \backslash R\_\{++\}^N$ is a vector of length $N$, with each coordinate being the price of a commodity. The prices may be zero or positive.

• The households are indexed as $i\backslash in\; I$.
• Each household begins with an endowment of commodities $r^i\backslash in\; \backslash R^N\_+$.
• Each household begins with a tuple of ownerships of the producers $\backslash alpha^\{i,j\}\; \backslash geq\; 0$. The ownerships satisfy $\backslash sum\_\{i\backslash in\; I\}\; \backslash alpha^\{i,j\}\; =\; 1\; \backslash quad\; \backslash forall\; j\backslash in\; J$.
• The budget that the household receives is the sum of its income from selling endowments at the market price, plus profits from its ownership of producers:$$M^i(p)\; =\; \backslash langle\; p,\; r^i\backslash rangle\; +\; \backslash sum\_\{j\backslash in\; J\}\backslash alpha^\{i,j\}\backslash Pi^j(p)$$($M$ stands for money)
• Each household has a Consumption Possibility Set $CPS^i\backslash subset\; \backslash R\_+^N$.
• Each household has a preference relation $\backslash succeq^i$ over $CPS^i$.
• With assumptions on $\backslash succeq^i$ (given in the next section), each preference relation is representable by a utility function $u^i:\; CPS^i\; \backslash to\; [0,\; 1]$ by the Debreu theorems. Thus instead of maximizing preference, we can equivalently state that the household is maximizing its utility.
• A consumption plan is a vector in $CPS^i$, written as $x^i$.
• $U\_+^i(x^i)$ is the set of consumption plans at least as preferable as $x^i$.
• The budget set is the set of consumption plans that it can afford:$$B^i(p)\; =\; \backslash \{x^i\; \backslash in\; CPS^i\; :\; \backslash langle\; p,\; x^i\; \backslash rangle\; \backslash leq\; M^i(p)\backslash \}$$.
• For each price vector $p$, the household has a demand vector for commodities, as $D^i(p)\backslash in\; \backslash R\_+^N$. This function is defined as the solution to a constraint maximization problem. It depends on both the economy and the initial distribution.$$D^i(p)\; :=\; \backslash arg\backslash max\_\{x^i\; \backslash in\; B^i(p)\}\; u^i(x^i)$$It may not be well-defined for all $p\; \backslash in\; \backslash R^N\_\{++\}$. However, we will use enough assumptions to be well-defined at equilibrium price vectors.

• The producers are indexed as $j\backslash in\; J$.
• Each producer has a Production Possibility Set $PPS^j$. Note that the supply vector may have both positive and negative coordinates. For example, $(-1,\; 1,\; 0)$ indicates a production plan that uses up 1 unit of commodity 1 to produce 1 unit of commodity 2.
• A production plan is a vector in $PPS^j$, written as $y^j$.
• For each price vector $p$, the producer has a supply vector for commodities, as $S^j(p)\backslash in\; \backslash R^N$. This function will be defined as the solution to a constraint maximization problem. It depends on both the economy and the initial distribution.$$S^j(p)\; :=\; \backslash arg\backslash max\_\{y^j\backslash in\; PPS^j\}\; \backslash langle\; p,\; y^j\backslash rangle$$It may not be well-defined for all $p\; \backslash in\; \backslash R^N\_\{++\}$. However, we will use enough assumptions to be well-defined at equilibrium price vectors.
• The profit is $$\backslash Pi^j(p)\; :=\; \backslash langle\; p,\; S^j(p)\backslash rangle\; =\; \backslash max\_\{y^j\backslash in\; PPS^j\}\; \backslash langle\; p,\; y^j\backslash rangle$$

• aggregate consumption possibility set $CPS\; =\; \backslash sum\_\{i\backslash in\; I\}CPS^i$.
• aggregate production possibility set $PPS\; =\; \backslash sum\_\{j\backslash in\; J\}PPS^j$.
• aggregate endowment $r\; =\; \backslash sum\_i\; r^i$
• aggregate demand $D(p)\; :=\; \backslash sum\_i\; D^i(p)$
• aggregate supply $S(p)\; :=\; \backslash sum\_j\; S^j(p)$
• excess demand $Z(p)\; =\; D(p)\; -\; S(p)\; -\; r$

• An economy is a tuple $(N,\; I,\; J,\; CPS^i,\; \backslash succeq^i,\; PPS^j)$. It is a tuple specifying the commodities, consumer preferences, consumption possibility sets, and producers' production possibility sets.
• An economy with initial distribution is an economy, along with an initial distribution tuple $(r^i,\; \backslash alpha^\{i,j\})\_\{i\backslash in\; I,\; j\backslash in\; J\}$ for the economy.
• A state of the economy is a tuple of price, consumption plans, and production plans for each household and producer: $((p\_n)\_\{n\backslash in\; 1:N\},\; (x^i)\_\{i\backslash in\; I\},\; (y^j)\_\{j\backslash in\; J\})$.
• A state is feasible iff each $x^i\; \backslash in\; CPS^i$, each $y^j\backslash in\; PPS^j$, and $\backslash sum\_\{i\backslash in\; I\}x^i\; \backslash preceq\; \backslash sum\_\{j\backslash in\; J\}y^j\; +\; r$.
• The feasible production possibilities set, given endowment $r$, is $PPS\_r\; :=\; \backslash \{y\backslash in\; PPS:\; y+r\; \backslash succeq\; 0\backslash \}$.
• Given an economy with distribution, the state corresponding to a price vector $p$ is $(p,\; (D^i(p))\_\{i\backslash in\; I\},\; (S^j(p))\_\{j\backslash in\; J\})$.
• Given an economy with distribution, a price vector $p$ is an equilibrium price vector for the economy with initial distribution, iff$$Z(p)\_n\; \backslash begin\{cases\}$$

\leq 0 \text{ if } p_n = 0 \\

= 0 \text{ if } p_n > 0

\end{cases}That is, if a commodity is not free, then supply exactly equals demand, and if a commodity is free, then supply is equal or greater than demand (we allow free commodity to be oversupplied).

• A state is an equilibrium state iff it is the state corresponding to an equilibrium price vector.

The functions $D^i(p),\; S^j(p)$ are not necessarily well-defined for all price vectors $p$. For example, if producer 1 is capable of transforming $t$ units of commodity 1 into $\backslash sqrt\{(t+1)^2-1\}$ units of commodity 2, and we have , then the producer can create plans with infinite profit, thus $\backslash Pi^j(p)\; =\; +\backslash infty$, and $S^j(p)$ is undefined.

Consequently, we define "restricted market" to be the same market, except there is a universal upper bound $C$, such that every producer is required to use a production plan $\backslash |y^j\backslash |\; \backslash leq\; C$. Each household is required to use a consumption plan $\backslash |x^i\backslash |\; \backslash leq\; C$. Denote the corresponding quantities on the restricted market with a tilde. So, for example, $\backslash tilde\; Z(p)$ is the excess demand function on the restricted market.The restricted market technique is described in (Starr 2011), Section 18.2. The technique was used in the original publication by Arrow and Debreu (1954).

$C$ is chosen to be "large enough" for the economy so that the restriction is not in effect under equilibrium conditions (see next section). In detail, $C$ is chosen to be large enough such that:

• For any consumption plan $x$ such that $x\; \backslash succeq\; 0,\; \backslash |x\backslash |\; =\; C$, the plan is so "extravagant" that even if all the producers coordinate, they would still fall short of meeting the demand.
• For any list of production plans for the economy $(y^j\backslash in\; PPS^j)\_\{j\backslash in\; J\}$, if $\backslash sum\_\{j\backslash in\; J\}\; y^j\; +\; r\; \backslash succeq\; 0$, then for each $j\backslash in\; J$. In other words, for any attainable production plan under the given endowment $r$, each producer's individual production plan must lie strictly within the restriction.

Each requirement is satisfiable.

• Define the set of attainable aggregate production plans to be $PPS\_r\; =\; \backslash left\backslash \{\backslash sum\_\{j\backslash in\; J\}\; y^j\; :\; y^j\; \backslash in\; PPS^j\; \backslash text\{\; for\; each\; \}\; j\backslash in\; J,\; \backslash text\{\; and\; \}\backslash sum\_\{j\backslash in\; J\}\; y^j\; +\; r\; \backslash succeq\; 0\backslash right\backslash \}$, then under the assumptions for the producers given above (especially the "no arbitrarily large free lunch" assumption), $PPS\_r$ is bounded for any $r\; \backslash succeq\; 0$ (proof omitted). Thus the first requirement is satisfiable.
• Define the set of attainable individual production plans to be $PPS\_r^j\; :=\; \backslash \{y^j\; \backslash in\; PPS^j:\; y^j\backslash text\{\; is\; a\; part\; of\; some\; attainable\; production\; plan\; under\; endowment\; \}r\backslash \}$then under the assumptions for the producers given above (especially the "no arbitrarily large transformations" assumption), $PPS\_r^j$ is bounded for any $j\backslash in\; J,\; r\; \backslash succeq\; 0$ (proof omitted). Thus the second requirement is satisfiable.

The two requirements together imply that the restriction is not a real restriction when the production plans and consumption plans are "interior" to the restriction.

• At any price vector $p$, if , then $S^j(p)$ exists and is equal to $\backslash tilde\; S^j(p)$. In other words, if the production plan of a restricted producer is interior to the artificial restriction, then the unrestricted producer would choose the same production plan. This is proved by exploiting the second requirement on $C$.
• If all $S^j(p)\; =\; \backslash tilde\; S^j(p)$, then the restricted and unrestricted households have the same budget. Now, if we also have , then $D^i(p)$ exists and is equal to $\backslash tilde\; D^i(p)$. In other words, if the consumption plan of a restricted household is interior to the artificial restriction, then the unrestricted household would choose the same consumption plan. This is proved by exploiting the first requirement on $C$.

These two propositions imply that equilibria for the restricted market are equilibria for the unrestricted market:{{Math theorem

| name = Theorem

| note =

| math_statement =If $p$ is an equilibrium price vector for the restricted market, then it is also an equilibrium price vector for the unrestricted market. Furthermore, we have $\backslash tilde\; D^i(p)\; =\; D^i(p),\; \backslash tilde\; S^j(p)\; =\; S^j(p)$.

}}

As the last piece of the construction, we define Walras's law:

• The unrestricted market satisfies Walras's law at $p$ iff all $S^j(p),\; D^i(p)$ are defined, and $\backslash langle\; p,\; Z(p)\backslash rangle\; =\; 0$, that is,$$\backslash sum\_\{j\backslash in\; J\}\; \backslash langle\; p,S^j(p)\backslash rangle\; +\; \backslash langle\; p,\; r\backslash rangle\; =\; \backslash sum\_\{i\backslash in\; I\}\; \backslash langle\; p,\; D^i(p)\backslash rangle$$
• The restricted market satisfies Walras's law at $p$ iff $\backslash langle\; p,\; \backslash tilde\; Z(p)\backslash rangle\; =\; 0$.

Walras's law can be interpreted on both sides:

• On the side of the households, it is said that the aggregate household expenditure is equal to aggregate profit and aggregate income from selling endowments. In other words, every household spends its entire budget.
• On the side of the producers, it is saying that the aggregate profit plus the aggregate cost equals the aggregate revenue.

{{Math theorem

| name = Theorem

| note =

| math_statement = $\backslash tilde\; Z$ satisfies weak Walras's law: For all $p\; \backslash in\; \backslash R\_\{++\}^N$,

$$\backslash langle\; p,\; \backslash tilde\; Z(p)\backslash rangle\; \backslash leq\; 0$$

and if , then $\backslash tilde\; Z(p)\_n\; >\; 0$ for some $n$.

}}

{{Math proof|title=Proof sketch|proof=

If total excess demand value is exactly zero, then every household has spent all their budget. Else, some household is restricted to spend only part of their budget. Therefore, that household's consumption bundle is on the boundary of the restriction, that is, $\backslash |\backslash tilde\; D^i(p)\backslash |\; =\; C$. We have chosen (in the previous section) $C$ to be so large that even if all the producers coordinate, they would still fall short of meeting the demand. Consequently there exists some commodity $n$ such that $\backslash tilde\; D^i(p)\_n\; >\; \backslash tilde\; S(p)\_n\; +\; r\_n$

}}

{{Math theorem

| name = Theorem

| note =

| math_statement = An equilibrium price vector exists for the restricted market, at which point the restricted market satisfies Walras's law.

}}

{{Math proof|title=Proof sketch|proof=

By definition of equilibrium, if $p$ is an equilibrium price vector for the restricted market, then at that point, the restricted market satisfies Walras's law.

$\backslash tilde\; Z$ is continuous since all $\backslash tilde\; S^j,\; \backslash tilde\; D^i$ are continuous.

Define a function $$f(p)\; =\; \backslash frac\{\backslash max(0,\; p\; +\; \backslash gamma\; \backslash tilde\; Z(p))\}\{\backslash sum\_n\; \backslash max(0,\; p\_n\; +\; \backslash gamma\; \backslash tilde\; Z(p)\_n)\}$$on the price simplex, where $\backslash gamma$ is a fixed positive constant.

By the weak Walras law, this function is well-defined. By Brouwer's fixed-point theorem, it has a fixed point. By the weak Walras law, this fixed point is a market equilibrium.

}}

Note that the above proof does not give an iterative algorithm for finding any equilibrium, as there is no guarantee that the function $f$ is a contraction. This is unsurprising, as there is no guarantee (without further assumptions) that any market equilibrium is a stable equilibrium.

{{Math theorem

| name = Corollary

| note =

| math_statement = An equilibrium price vector exists for the unrestricted market, at which point the unrestricted market satisfies Walras's law.

}}

Image:Unit circle.svg leaves the point (0,0) fixed but moves every point on the non–convex unit circle.]]

{{Main|Kakutani fixed-point theorem}}

{{See also|Convex set|Compact set|Continuous function|Fixed-point theorem|Brouwer fixed-point theorem}}

In 1954, McKenzie and the pair Arrow and Debreu independently proved the existence of general equilibria by invoking the Kakutani fixed-point theorem on the fixed points of a continuous function from a compact, convex set into itself. In the Arrow–Debreu approach, convexity is essential, because such fixed-point theorems are inapplicable to non-convex sets. For example, the rotation of the unit circle by 90 degrees lacks fixed points, although this rotation is a continuous transformation of a compact set into itself; although compact, the unit circle is non-convex. In contrast, the same rotation applied to the convex hull of the unit circle leaves the point (0,0) fixed. Notice that the Kakutani theorem does not assert that there exists exactly one fixed point. Reflecting the unit disk across the y-axis leaves a vertical segment fixed, so that this reflection has an infinite number of fixed points.

{{See also|Shapley–Folkman lemma|Market failure}}

The assumption of convexity precluded many applications, which were discussed in the Journal of Political Economy from 1959 to 1961 by Francis M. Bator, M. J. Farrell, Tjalling Koopmans, and Thomas J. Rothenberg.{{citation

| last = Starr | first = Ross M. | author-link = Ross Starr

| issue = 1

| journal = Econometrica

| pages = 25–38

| title = Quasi–equilibria in markets with non–convex preferences (Appendix 2: The Shapley–Folkman theorem, pp. 35–37)

| volume = 37

| year = 1969

| jstor=1909201

| doi=10.2307/1909201

| citeseerx = 10.1.1.297.8498 }}. {{harvs|first=Ross M.|last=Starr|authorlink=Ross Starr|year=1969|txt}} proved the existence of economic equilibria when some consumer preferences need not be convex. In his paper, Starr proved that a "convexified" economy has general equilibria that are closely approximated by "quasi-equilbria" of the original economy; Starr's proof used the Shapley–Folkman theorem.{{cite book|last=Starr|first= Ross M.|author-link=Ross Starr|chapter=Shapley–Folkman theorem|title=The New Palgrave Dictionary of Economics|editor1-first=Steven N.|editor1-last=Durlauf|editor2-first=Lawrence E.|editor2-last=Blume|publisher=Palgrave Macmillan|year=2008|edition=Second|volume=4|pages=317–318 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde2008_S000107|doi=10.1057/9780230226203.1518|isbn= 978-0-333-78676-5}}

(Uzawa, 1962){{Cite journal |last=Uzawa |first=Hirofumi |date=1962 |title=Walras' Existence Theorem and Brouwer's Fixed-Point Theorem |url=https://www.jstage.jst.go.jp/article/economics1950/13/1/13_1_59/_article/-char/ja/ |journal=季刊 理論経済学 |volume=13 |issue=1 |pages=59–62 |doi=10.11398/economics1950.13.1_59}} showed that the existence of general equilibrium in an economy characterized by a continuous excess demand function fulfilling Walras's Law is equivalent to Brouwer fixed-Point theorem. Thus, the use of Brouwer's fixed-point theorem is essential for showing that the equilibrium exists in general.(Starr 2011), Section 18.4

In welfare economics, one possible concern is finding a Pareto-optimal plan for the economy.

Intuitively, one can consider the problem of welfare economics to be the problem faced by a master planner for the whole economy: given starting endowment $r$ for the entire society, the planner must pick a feasible master plan of production and consumption plans $((x^i)\_\{i\backslash in\; I\},\; (y^j)\_\{j\backslash in\; J\})$. The master planner has a wide freedom in choosing the master plan, but any reasonable planner should agree that, if someone's utility can be increased, while everyone else's is not decreased, then it is a better plan. That is, the Pareto ordering should be followed.

Define the Pareto ordering on the set of all plans $((x^i)\_\{i\backslash in\; I\},\; (y^j)\_\{j\backslash in\; J\})$ by $((x^i)\_\{i\backslash in\; I\},\; (y^j)\_\{j\backslash in\; J\})\; \backslash succeq((x\text{'}^i)\_\{i\backslash in\; I\},\; (y\text{'}^j)\_\{j\backslash in\; J\})$ iff $x^i\; \backslash succeq^i\; x\text{'}^i$ for all $i\backslash in\; I$.

Then, we say that a plan is Pareto-efficient with respect to a starting endowment $r$, iff it is feasible, and there does not exist another feasible plan that is strictly better in Pareto ordering.

In general, there are a whole continuum of Pareto-efficient plans for each starting endowment $r$.

With the set up, we have two fundamental theorems of welfare economics:(Starr 2011), Chapter 19

{{Math theorem|name=First fundamental theorem of welfare economics|note=|math_statement= Any market equilibrium state is Pareto-efficient.}}

{{Math proof|title=Proof sketch|proof=

The price hyperplane separates the attainable productions and the Pareto-better consumptions. That is, the hyperplane $\backslash langle\; p^*,\; q\backslash rangle\; =\; \backslash langle\; p^*,\; D(p^*)\backslash rangle$ separates $r\; +\; PPS\_r$ and $U\_\{++\}$, where $U\_\{++\}$ is the set of all $\backslash sum\_\{i\backslash in\; I\}\; x\text{'}^i$, such that $\backslash forall\; i\backslash in\; I,\; x\text{'}^i\backslash in\; CPS^i,\; x\text{'}^i\; \backslash succeq^i\; x^i$, and $\backslash exists\; i\backslash in\; I,\; x\text{'}^i\; \backslash succ^i\; x^i$. That is, it is the set of aggregates of all possible consumption plans that are strictly Pareto-better.

The attainable productions are on the lower side of the price hyperplane, while the Pareto-better consumptions are strictly on the upper side of the price hyperplane. Thus any Pareto-better plan is not attainable.

• Any Pareto-better consumption plan must cost at least as much for every household, and cost more for at least one household.
• Any attainable production plan must profit at most as much for every producer.

}}

{{Math theorem

| name = Second fundamental theorem of welfare economics

| note =

| math_statement = For any total endowment $r$, and any Pareto-efficient state achievable using that endowment, there exists a distribution of endowments $\backslash \{r^i\backslash \}\_\{i\backslash in\; I\}$ and private ownerships $\backslash \{\backslash alpha^\{i,j\}\backslash \}\_\{i\backslash in\; I,\; j\backslash in\; J\}$ of the producers, such that the given state is a market equilibrium state for some price vector $p\backslash in\; \backslash R\_\{++\}^N$.

}}Proof idea: any Pareto-optimal consumption plan is separated by a hyperplane from the set of attainable consumption plans. The slope of the hyperplane would be the equilibrium prices. Verify that under such prices, each producer and household would find the given state optimal. Verify that Walras's law holds, and so the expenditures match income plus profit, and so it is possible to provide each household with exactly the necessary budget.

{{Math proof|title=Proof|proof=

Since the state is attainable, we have $\backslash sum\_\{i\backslash in\; I\}x^i\; \backslash preceq\; \backslash sum\_\{j\backslash in\; J\}y^j\; +\; r$. The equality does not necessarily hold, so we define the set of attainable aggregate consumptions $V\; :=\; \backslash \{r\; +\; y\; -\; z:\; y\; \backslash in\; PPS,\; z\; \backslash succeq\; 0\backslash \}$. Any aggregate consumption bundle in $V$ is attainable, and any outside is not.

Find the market price $p$.

: Define $U\_\{++\}$ to be the set of all $\backslash sum\_\{i\backslash in\; I\}\; x\text{'}^i$, such that $\backslash forall\; i\backslash in\; I,\; x\text{'}^i\backslash in\; CPS^i,\; x\text{'}^i\; \backslash succeq^i\; x^i$, and $\backslash exists\; i\backslash in\; I,\; x\text{'}^i\; \backslash succ^i\; x^i$. That is, it is the set of aggregates of all possible consumption plans that are strictly Pareto-better. Since each $CPS^i$ is convex, and each preference is convex, the set $U\_\{++\}$ is also convex.

: Now, since the state is Pareto-optimal, the set $U\_\{++\}$ must be unattainable with the given endowment. That is, $U\_\{++\}$ is disjoint from $V$. Since both sets are convex, there exists a separating hyperplane between them.

: Let the hyperplane be defined by $\backslash langle\; p,\; q\backslash rangle\; =\; c$, where $p\backslash in\; \backslash R^N,\; p\backslash neq\; 0$, and $c=\; \backslash sum\_\{i\backslash in\; I\}\backslash langle\; p,\; x^i\backslash rangle$. The sign is chosen such that $\backslash langle\; p,\; U\_\{++\}\backslash rangle\; \backslash geq\; c$ and $\backslash langle\; p,\; r+PPS\backslash rangle\; \backslash leq\; c$.

Claim: $p\; \backslash succ\; 0$.

: Suppose not, then there exists some $n\backslash in\; 1:N$ such that . Then $\backslash langle\; p,\; r\; +\; 0\; -\; k\; e\_n\backslash rangle\; >\; c$ if $k$ is large enough, but we also have $r\; +\; 0\; -\; k\; e\_n\backslash in\; V$, contradiction.

We have by construction $\backslash langle\; p,\; \backslash sum\_\{i\backslash in\; I\}x^i\backslash rangle\; =\; c$, and $\backslash langle\; p,\; V\backslash rangle\; \backslash leq\; c$. Now we claim: $\backslash langle\; p,\; U\_\{++\}\backslash rangle\; >\; c$.

: For each household $i$, let $U\_+^i(x^i)$ be the set of consumption plans for $i$ that are at least as good as $x^i$, and $U\_\{++\}^i(x^i)$ be the set of consumption plans for $i$ that are strictly better than $x^i$.

: By local nonsatiation of $\backslash succeq^i$, the closed half-space $\backslash langle\; p,\; q\backslash rangle\; \backslash geq\; \backslash langle\; p,\; x^i\backslash rangle$ contains $U\_+^i(x^i)$.

: By continuity of $\backslash succeq^i$, the open half-space $\backslash langle\; p,\; q\backslash rangle\; >\; \backslash langle\; p,\; x^i\backslash rangle$ contains $U\_\{++\}^i(x^i)$.

: Adding them up, we find that the open half-space $\backslash langle\; p,\; q\backslash rangle\; >\; c$ contains $U\_\{++\}$.

Claim (Walras's law): $\backslash langle\; p,\; r\; +\; \backslash sum\_j\; y^j\backslash rangle\; =c\; =\backslash langle\; p,\; \backslash sum\_i\; x^i\backslash rangle$

: Since the production is attainable, we have $r\; +\; \backslash sum\_j\; y^j\; \backslash succeq\; \backslash sum\_i\; x^i$, and since $p\backslash succ\; 0$, we have $\backslash langle\; p,\; r\; +\; \backslash sum\_j\; y^j\backslash rangle\; \backslash geq\; \backslash langle\; p,\; \backslash sum\_i\; x^i\backslash rangle$.

: By construction of the separating hyperplane, we also have $\backslash langle\; p,\; r\; +\; \backslash sum\_j\; y^j\backslash rangle\; \backslash leq\; c\; =\backslash langle\; p,\; \backslash sum\_i\; x^i\backslash rangle$, thus we have an equality.

Claim: at price $p$, each producer $j$ maximizes profit at $y^j$,

: If there exists some production plan $y\text{'}^j$ such that one producer can reach higher profit $\backslash langle\; p,\; y\text{'}^j\backslash rangle\; >\; \backslash langle\; p,\; y^j\backslash rangle$, then

: $$\backslash langle\; p,\; r\backslash rangle+\; \backslash sum\_\{j\backslash in\; J\}\backslash langle\; p,\; y\text{'}^j\backslash rangle\; >\backslash langle\; p,\; r\backslash rangle+\; \backslash sum\_\{j\backslash in\; J\}\backslash langle\; p,\; y^j\backslash rangle\; =\; c$$

: but then we would have a point in $r+PPS$ on the other side of the separating hyperplane, violating our construction.

Claim: at price $p$ and budget $\backslash langle\; p,\; x^i\backslash rangle$, household $i$ maximizes utility at $x^i$.

: Otherwise, there exists some $x\text{'}^i$ such that $x\text{'}^i\; \backslash succ^i\; x^i$ and $\backslash langle\; p,\; x\text{'}^i\backslash rangle\; \backslash leq\; \backslash langle\; p,\; x^i\backslash rangle$. Then, consider aggregate consumption bundle $q\text{'}\; :=\; \backslash sum\_\{i\text{'}\backslash in\; I,\; i\text{'}\; \backslash neq\; i\}x^i\; +\; x\text{'}^i$. It is in $U\_\{++\}$, but also satisfies $\backslash langle\; p,\; q\text{'}\backslash rangle\; \backslash leq\; \backslash sum\; \backslash langle\; p,\; x^i\backslash rangle\; =\; c$. But this contradicts previous claim that $\backslash langle\; p,\; U\_\{++\}\backslash rangle\; >\; c$.

By Walras's law, the aggregate endowment income and profit exactly equals aggregate expenditure. It remains to distribute them such that each household $i$ obtains exactly $\backslash langle\; p,\; x^i\backslash rangle$ as its budget. This is trivial.

: Here is a greedy algorithm to do it: first distribute all endowment of commodity 1 to household 1. If household 1 can reach its budget before distributing all of it, then move on to household 2. Otherwise, start distributing all endowment of commodity 2, etc. Similarly for ownerships of producers.

}}

The assumptions of strict convexity can be relaxed to convexity. This modification changes supply and demand functions from point-valued functions into set-valued functions (or "correspondences"), and the application of Brouwer's fixed-point theorem into Kakutani's fixed-point theorem.

This modification is similar to the generalization of the minimax theorem to the existence of Nash equilibria.

The two fundamental theorems of welfare economics holds without modification.

The definition of market equilibrium assumes that every household performs utility maximization, subject to budget constraints. That is, $$\backslash begin\{cases\}$$

\max_{x^i} u^i(x^i) \\

\langle p, x^i\rangle \leq M^i(p)

\end{cases}The dual problem would be cost minimization subject to utility constraints. That is,$$\backslash begin\{cases\}$$

u^i(x^i) \geq u^i_0\\

\min_{x^i} \langle p, x^i\rangle

\end{cases}for some real number $u^i\_0$. The duality gap between the two problems is nonnegative, and may be positive. Consequently, some authors study the dual problem and the properties of its "quasi-equilibrium"{{Cite book |last=Debreu |first=Gerard |url=https://books.google.com/books?id=QkX10epC46cC |title=Theory of Value: An Axiomatic Analysis of Economic Equilibrium |date=1959-01-01 |publisher=Yale University Press |isbn=978-0-300-01559-1 |language=en}} (or "compensated equilibrium"{{Cite book |last=Arrow |first=Kenneth J. |url=http://worldcat.org/oclc/817224321 |title=General competitive analysis |date=2007 |publisher=North-Holland |isbn=978-0-444-85497-1 |pages= |oclc=817224321}}). Every equilibrium is a quasi-equilibrium, but the converse is not necessarily true.

In the model, all producers and households are "price takers", meaning that they transact with the market using the price vector $p$. In particular, behaviors such as cartel, monopoly, consumer coalition, etc are not modelled. Edgeworth's limit theorem shows that under certain stronger assumptions, the households can do no better than price-take at the limit of an infinitely large economy.

In detail, we continue with the economic model on the households and producers, but we consider a different method to design production and distribution of commodities than the market economy. It may be interpreted as a model of a "socialist" economy.

• There is no money, market, or private ownership of producers.
• Since we have abolished private ownership, money, and the profit motive, there is no point in distinguishing one producer from the next. Consequently, instead of each producer planning individually $y^j\; \backslash in\; PPS^j$, it is as if the whole society has one great producer producing $y\backslash in\; PPS$.
• Households still have the same preferences and endowments, but they no longer have budgets.
• Producers do not produce to maximize profit, since there is no profit. All households come together to make a state $((x\_i)\_\{i\backslash in\; I\},\; y)$—a production and consumption plan for the whole economy—with the following constraints:$$x^i\; \backslash in\; CPS^i,\; y\; \backslash in\; PPS,\; y\backslash succeq\; \backslash sum\_i\; (x^i-\; r^i)$$
• Any nonempty subset of households may eliminate all other households, while retaining control of the producers.

This economy is thus a cooperative game with each household being a player, and we have the following concepts from cooperative game theory:

• A blocking coalition is a nonempty subset of households, such that there exists a strictly Pareto-better plan even if they eliminate all other households.
• A state is a core state iff there are no blocking coalitions.
• The core of an economy is the set of core states.

Since we assumed that any nonempty subset of households may eliminate all other households, while retaining control of the producers, the only states that can be executed are the core states. A state that is not a core state would immediately be objected by a coalition of households.

We need one more assumption on $PPS$, that it is a cone, that is, $k\; \backslash cdot\; PPS\; \backslash subset\; PPS$ for any $k\; \backslash geq\; 0$. This assumption rules out two ways for the economy to become trivial.

• The curse of free lunch: In this model, the whole $PPS$ is available to any nonempty coalition, even a coalition of one. Consequently, if nobody has any endowment, and yet $PPS$ contains some "free lunch" $y\backslash succ\; 0$, then (assuming preferences are monotonic) every household would like to take all of $y$ for itself, and consequently there exists *no* core state. Intuitively, the picture of the world is a committee of selfish people, vetoing any plan that doesn't give the entire free lunch to itself.
• The limit to growth: Consider a society with 2 commodities. One is "labor" and another is "food". Households have only labor as endowment, but they only consume food. The $PPS$ looks like a ramp with a flat top. So, putting in 0-1 thousand hours of labor produces 0-1 thousand kg of food, linearly, but any more labor produces no food. Now suppose each household is endowed with 1 thousand hours of labor. It's clear that every household would immediately block every other household, since it's always better for one to use the entire $PPS$ for itself.

{{Math theorem|name=Proposition|math_statement= Market equilibria are core states.

}}

{{Math proof|title=Proof|proof=

Define the price hyperplane $\backslash langle\; p,\; q\; \backslash rangle\; =\; \backslash langle\; p,\; \backslash sum\_j\; y^j\backslash rangle$. Since it's a supporting hyperplane of $PPS$, and $PPS$ is a convex cone, the price hyperplane passes the origin. Thus $\backslash langle\; p,\; \backslash sum\_j\; y^j\backslash rangle\; =\; \backslash langle\; p,\; \backslash sum\_i\; x^i\; -\; r^i\backslash rangle\; =\; 0$.

Since $\backslash sum\_j\; \backslash langle\; p,\; y^j\backslash rangle$ is the total profit, and every producer can at least make zero profit (that is, $0\; \backslash in\; PPS^j$ ), this means that the profit is exactly zero for every producer. Consequently, every household's budget is exactly from selling endowment.

$$\backslash langle\; p,\; x^i\; \backslash rangle\; =\; \backslash langle\; p,\; r^i\backslash rangle$$

By utility maximization, every household is already doing as much as it could. Consequently, we have $\backslash langle\; p,\; U^i\_\{++\}(x^i)\backslash rangle\; >\; \backslash langle\; p,\; r^i\backslash rangle$.

In particular, for any coalition $I\text{'}\; \backslash subset\; I$, and any production plan $x\text{'}^i$ that is Pareto-better, we have

$$\backslash sum\_\{i\backslash in\; I\text{'}\}\; \backslash langle\; p,\; x\text{'}^i\; \backslash rangle\; >\backslash sum\_\{i\backslash in\; I\text{'}\}\; \backslash langle\; p,\; r^i\; \backslash rangle$$

and consequently, the point $\backslash sum\_\{i\backslash in\; I\text{'}\}\; x\text{'}^i\; -\; r^i$ lies above the price hyperplane, making it unattainable.

}}

In Debreu and Scarf's paper, they defined a particular way to approach an infinitely large economy, by "replicating households". That is, for any positive integer $K$, define an economy where there are $K$ households that have exactly the same consumption possibility set and preference as household $i$.

Let $x^\{i,\; k\}$ stand for the consumption plan of the $k$-th replicate of household $i$. Define a plan to be equitable iff $x^\{i,\; k\}\; \backslash sim^i\; x^\{i,\; k\text{'}\}$ for any $i\backslash in\; I$ and $k,\; k\text{'}\backslash in\; K$.

In general, a state would be quite complex, treating each replicate differently. However, core states are significantly simpler: they are equitable, treating every replicate equally.

{{Math theorem|name=Proposition|math_statement= Any core state is equitable.}}

{{Math proof|title=Proof|proof= We use the "underdog coalition".

Consider a core state $x^\{i,\; k\}$. Define average distributions $\backslash bar\; x^\{i\}\; :=\; \backslash frac\; 1K\; \backslash sum\_\{k\backslash in\; K\}\; x^\{i,k\}$.

It is attainable, so we have $K\; \backslash sum\_\{i\}\; (\backslash bar\; x^i\; -\; r^i)\; \backslash in\; PPS$

Suppose there exist any inequality, that is, some $x^\{i,\; k\}\; \backslash succ^i\; x^\{i,\; k\text{'}\}$, then by convexity of preferences, we have $\backslash bar\; x^i\; \backslash succ^i\; x^\{i,\; k\text{'}\}$, where $k\text{'}$ is the worst-treated household of type $i$.

Now define the "underdog coalition" consisting of the worst-treated household of each type, and they propose to distribute according to $\backslash bar\; x^i$. This is Pareto-better for the coalition, and since $PP$ is conic, we also have $\backslash sum\_i(\backslash bar\; x^i\; -\; r^i)\; \backslash in\; PPS$, so the plan is attainable. Contradiction.

}}

Consequently, when studying core states, it is sufficient to consider one consumption plan for each type of households. Now, define $C\_K$ to be the set of all core states for the economy with $K$ replicates per household. It is clear that $C\_1\; \backslash supset\; C\_2\; \backslash supset\; \backslash cdots$, so we may define the limit set of core states $C\; :=\; \backslash cap\_\{K=1\}^\backslash infty\; C\_K$.

We have seen that $C$ contains the set of market equilibria for the original economy. The converse is true under minor additional assumption:(Starr 2011) Theorem 22.2

{{Math theorem

| name = (Debreu and Scarf, 1963)

| note =

| math_statement = If $PPS$ is a polygonal cone, or if every $CPS^i$ has nonempty interior with respect to $\backslash R^N$, then $C$ is the set of market equilibria for the original economy.

}}

The assumption that $PPS$ is a polygonal cone, or every $CPS^i$ has nonempty interior, is necessary to avoid the technical issue of "quasi-equilibrium". Without the assumption, we can only prove that $C$ is contained in the set of quasi-equilibria.

The assumption that production possibility sets are convex is a strong constraint, as it implies that there is no economy of scale. Similarly, we may consider nonconvex consumption possibility sets and nonconvex preferences. In such cases, the supply and demand functions $S^j(p),\; D^i(p)$ may be discontinuous with respect to price vector, thus a general equilibrium may not exist.

However, we may "convexify" the economy, find an equilibrium for it, then by the Shapley–Folkman–Starr theorem, it is an approximate equilibrium for the original economy.

In detail, given any economy satisfying all the assumptions given, except convexity of $PPS^j,\; CPS^i$ and $\backslash succeq^i$, we define the "convexified economy" to be the same economy, except that

• $PPS\text{'}^j\; =\; \backslash mathrm\{Conv\}(PPS^j)$
• $CPS\text{'}^i\; =\; \backslash mathrm\{Conv\}(CPS^i)$
• $x\; \backslash succeq\text{'}^i\; y$ iff $\backslash forall\; z\; \backslash in\; CPS^i,\; y\; \backslash in\; \backslash mathrm\{Conv\}(U\_+^i(z))\; \backslash implies\; x\; \backslash in\; \backslash mathrm\{Conv\}(U\_+^i(z))$.

where $\backslash mathrm\{Conv\}$ denotes the convex hull.

With this, any general equilibrium for the convexified economy is also an approximate equilibrium for the original economy. That is, if $p^*$ is an equilibrium price vector for the convexified economy, then(Starr 2011), Theorem 25.1$$\backslash begin\{align\}$$

d(D'(p^*) - S'(p^*), D(p^*) - S(p^*)) &\leq N\sqrt{L} \\

d(r, D(p^*) - S(p^*)) &\leq N\sqrt{L}

\end{align}where $d(\backslash cdot,\; \backslash cdot)$ is the Euclidean distance, and $L$ is any upper bound on the inner radii of all $PPS^j,\; CPS^i$ (see page on Shapley–Folkman–Starr theorem for the definition of inner radii).

The convexified economy may not satisfy the assumptions. For example, the set $\backslash \{(x,\; 0):\; x\; \backslash geq\; 0\backslash \}\backslash cup\; \backslash \{(x,y):\; xy\; =\; 1,\; x\; >\; 0\backslash \}$ is closed, but its convex hull is not closed. Imposing the further assumption that the convexified economy also satisfies the assumptions, we find that the original economy always has an approximate equilibrium.

{{see|Financial economics#State prices|State prices#Application to financial assets|Contingent claim analysis}}

The commodities in the Arrow–Debreu model are entirely abstract. Thus, although it is typically represented as a static market, it can be used to model time, space, and uncertainty by splitting one commodity into several, each contingent on a certain time, place, and state of the world. For example, "apples" can be divided into "apples in New York in September if oranges are available" and "apples in Chicago in June if oranges are not available".

Given some base commodities, the Arrow–Debreu complete market is a market where there is a separate commodity for every future time, for every place of delivery, for every state of the world under consideration, for every base commodity.

In financial economics the term "Arrow–Debreu" most commonly refers to an Arrow–Debreu security. A canonical Arrow–Debreu security is a security that pays one unit of numeraire if a particular state of the world is reached and zero otherwise (the price of such a security being a so-called "state price"). As such, any derivatives contract whose settlement value is a function on an underlying whose value is uncertain at contract date can be decomposed as linear combination of Arrow–Debreu securities.

Since the work of Breeden and Lizenberger in 1978,{{cite journal |title=Prices of State-Contingent Claims Implicit in Option Prices |first1=Douglas T. |last1=Breeden |first2=Robert H. |last2=Litzenberger |journal=Journal of Business |volume=51 |issue=4 |year=1978 |pages=621–651 |jstor=2352653 |doi=10.1086/296025|s2cid=153841737 }} a large number of researchers have used options to extract Arrow–Debreu prices for a variety of applications in financial economics.{{cite journal |last1=Almeida |first1=Caio |last2=Vicente |first2=José |year=2008 |title=Are interest rate options important for the assessment of interest risk? |journal=Working Papers Series N. 179, Central Bank of Brazil |url=http://www.bcb.gov.br/pec/wps/ingl/wps179.pdf }}

{{blockquote|No theory of money is offered here, and it is assumed that the economy works without the help of a good serving as medium of exchange.|Gérard Debreu|Theory of value: An axiomatic analysis of economic equilibrium (1959)|source=}}{{blockquote|To the pure theorist, at the present juncture the most interesting and challenging aspect of money is that it can find no place in an Arrow–Debreu economy. This circumstance should also be of considerable significance to macroeconomists, but it rarely is.|Frank Hahn|The foundations of monetary theory (1987)|source=}}Typically, economists consider the functions of money to be as a unit of account, store of value, medium of exchange, and standard of deferred payment. This is however incompatible with the Arrow–Debreu complete market described above. In the complete market, there is only a one-time transaction at the market "at the beginning of time". After that, households and producers merely execute their planned productions, consumptions, and deliveries of commodities until the end of time. Consequently, there is no use for storage of value or medium of exchange. This applies not just to the Arrow–Debreu complete market, but also to models (such as those with markets of contingent commodities and Arrow insurance contracts) that differ in form, but are mathematically equivalent to it.(Starr 2011) Exercise 20.15

{{Main|Computable general equilibrium}}

Scarf (1967){{Cite journal |last=Scarf |first=Herbert |date=September 1967 |title=The Approximation of Fixed Points of a Continuous Mapping |url=http://dx.doi.org/10.1137/0115116 |journal=SIAM Journal on Applied Mathematics |volume=15 |issue=5 |pages=1328–1343 |doi=10.1137/0115116 |issn=0036-1399}} was the first algorithm that computes the general equilibrium. See Scarf (2018){{Citation |last=Scarf |first=Herbert E. |title=Computation of General Equilibria |date=2018 |url=http://dx.doi.org/10.1057/978-1-349-95189-5_451 |work=The New Palgrave Dictionary of Economics |pages=1973–1984 |place=London |publisher=Palgrave Macmillan UK |doi=10.1057/978-1-349-95189-5_451 |isbn=978-1-349-95188-8 |access-date=2023-01-06}} and Kubler (2012){{Citation |last=Kubler |first=Felix |title=Computation of General Equilibria (New Developments) |url=http://dx.doi.org/10.1057/9781137336583.0296 |work=The New Palgrave Dictionary of Economics, 2012 Version |year=2012 |place=Basingstoke |publisher=Palgrave Macmillan |doi=10.1057/9781137336583.0296 |isbn=9781137336583 |access-date=2023-01-06}} for reviews.

{{See also|General equilibrium theory#Uniqueness}}

Certain economies at certain endowment vectors may have infinitely equilibrium price vectors. However, "generically", an economy has only finitely many equilibrium price vectors. Here, "generically" means "on all points, except a closed set of Lebesgue measure zero", as in Sard's theorem.{{Citation |last=Debreu |first=Gérard |title=Stephen Smale and the Economic Theory of General Equilibrium |date=June 2000 |url=http://dx.doi.org/10.1142/9789812792815_0025 |work=The Collected Papers of Stephen Smale |pages=243–258 |publisher=World Scientific Publishing Company |doi=10.1142/9789812792815_0025 |isbn=978-981-02-4991-5 |access-date=2023-01-06}}{{Citation |last=Smale |first=Steve |title=Chapter 8 Global analysis and economics |date=1981-01-01 |url=https://www.sciencedirect.com/science/article/pii/S1573438281010126 |series=Handbook of Mathematical Economics |volume=1 |pages=331–370 |publisher=Elsevier |doi=10.1016/S1573-4382(81)01012-6 |isbn=978-0-444-86126-9 |language=en |access-date=2023-01-06}}

There are many such genericity theorems. One example is the following:{{Cite journal |last=Debreu |first=Gérard |date=December 1984 |title=Economic Theory in the Mathematical Mode |url=http://dx.doi.org/10.2307/3439651 |journal=The Scandinavian Journal of Economics |volume=86 |issue=4 |pages=393–410 |doi=10.2307/3439651 |jstor=3439651 |issn=0347-0520}}(Starr 2011) Section 26.3

{{Math theorem

| name = Genericity

| math_statement = For any strictly positive endowment distribution $r^1,\; ...,\; r^I\; \backslash in\; \backslash R\_\{++\}^N$, and any strictly positive price vector $p\backslash in\; \backslash R\_\{++\}^N$, define the excess demand $Z(p,\; r^1,\; ...,\; r^I)$ as before.

If on all $p,\; r^1,\; ...,\; r^I\; \backslash in\; \backslash R\_\{++\}^N$,

• $Z(p,\; r^1,\; ...,\; r^I)$ is well-defined,
• $Z$ is differentiable,
• $\backslash nabla\_p\; Z$ has $(N-1)$,

then for generically any endowment distribution $r^1,\; ...,\; r^I\; \backslash in\; \backslash R\_\{++\}^N$, there are only finitely many equilibria $p^*\; \backslash in\; \backslash R\_\{++\}^N$.

}}

{{Math proof|title=Proof (sketch)|proof=

Define the "equilibrium manifold" as the set of solutions to $Z=0$. By Walras's law, one of the constraints is redundant. By assumptions that $\backslash nabla\_p\; Z$ has rank $(N-1)$, no more constraints are redundant. Thus the equilibrium manifold has dimension $N\; \backslash times\; I$, which is equal to the space of all distributions of strictly positive endowments $\backslash R\_\{++\}^\{N\; \backslash times\; I\}$.

By continuity of $Z$, the projection is closed. Thus by Sard's theorem, the projection from the equilibrium manifold to $\backslash R\_\{++\}^\{N\; \backslash times\; I\}$ is critical on only a set of measure 0. It remains to check that the preimage of the projection is generically not just discrete, but also finite.

}}

• Model (economics)
• Incomplete markets
• Arrow-Debreu exchange market - a simpler market model, in which there are only households (who can be both buyers and sellers), but no producers.
• Fisher market - an even simpler market model, in which there are only buyers; the total quantity of each product is given, and each buyer comes only with a monetary budget.
• List of asset pricing articles
• {{slink|Financial economics #Underlying economics}}

{{Reflist|30em}}

• {{cite book |first=Kartik B. |last=Athreya |chapter=The Modern Macroeconomic Approach and the Arrow–Debreu–McKenzie Model |pages=11–46 |title=Big Ideas in Macroeconomics: A Nontechnical View |location=Cambridge |publisher=MIT Press |year=2013 |isbn=978-0-262-01973-6 }}
• {{cite book |first=John |last=Geanakoplos |year=1987 |chapter=Arrow–Debreu model of general equilibrium |title=The New Palgrave: A Dictionary of Economics |volume=1 |pages=116–124 |title-link=New Palgrave: A Dictionary of Economics }}
• {{cite book |last=Takayama |first=Akira |title=Mathematical Economics |location=London |publisher=Cambridge University Press |edition=2nd |year=1985 |isbn=978-0-521-31498-5 |pages=[https://archive.org/details/mathematicalecon00taka/page/255 255]–284 |url=https://archive.org/details/mathematicalecon00taka |url-access=registration }}
• {{cite journal |first=Till |last=Düppe |year=2012 |title=Arrow and Debreu de-homogenized |journal=Journal of the History of Economic Thought |volume=34 |issue=4 |pages=491–514 |doi= 10.1017/s1053837212000491|citeseerx=10.1.1.416.2120 |s2cid=15771197 }}

• [https://web.archive.org/web/20060711212545/http://www.hss.caltech.edu/~kcb/Notes/Arrow-Debreu.pdf Notes on the Arrow–Debreu–McKenzie Model of an Economy], Prof. Kim C. Border California Institute of Technology
• [https://web.archive.org/web/20070628225647/http://www.in-the-money.com/artandpap/IV%20Fundamental%20Theorem%20-%20Part%20I.doc "The Fundamental Theorem" of Finance]; [https://web.archive.org/web/20070628225647/http://www.in-the-money.com/artandpap/IV%20Fundamental%20Theorem%20-%20Part%20II.doc part II]. Prof. Mark Rubinstein, Haas School of Business {{dead link|date=February 2014}}

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