Quasi-Equilibria in Markets with Non-Convex Preferences

by R. M. Starr

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Classic mathematical approaches to the proof of existence of general equilibrium have assumed that every consumer maximizes utility under budget constraint, regardless of the number of consumers in the market. Such approaches fail to take advantage of the friction (lack of a completely smoothly working market) that has been built into the system. This study develops a quasi-equilibrium model, eliminates the common convexity assumption, and shows that if the number of traders is sufficiently large, there is a configuration under which divergence from equilibrium can be made small relative to the size of the market.

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