Fundamental Non-convexity and Externalities: A Differentiable Approach

In: The B.E. journal of theoretical economics, Band 15, Heft 1

Abstract

AbstractIt is well known that externalities cause fundamental non-convexity problems in the production set. We demonstrate that the differentiable approach is a proper tool. Existence of equilibrium obtains without requiring aggregate convexity in consumption or production. Our model allows general externalities in consumption and production and also price dependency.