An Adjustment Process for Nonconvex Production Economies

Abstract

We prove the existence of a path of market conditions, i.e. combinations of market prices and production quantities, that links any arbitrarily chosen market condition with an equilibrium, in a general equilibrium model with possibly nonconvex production technologies based on Villar [Villar, A., 1994. Equilibrium with nonconvex production technologies. Economic Theory 4, 629-638] and Villar [Villar, A., 1999. Equilibrium and Efficiency in Production Economies, second ed., Springer Verlag, Berlin]. This existence theorem holds for any semi-algebraic version of the model and the adjustment of market conditions along the path can be given an economic interpretation as a tâtonnement process. Any such path can be approximated arbitrarily close by applying a simplicial algorithm. By restarting this algorithm in a different market condition,we may find more than one equilibrium.