1. GENERAL COMPETITIVE EQUILIBRIUM 1.1. Economic system. An economic system is a collection of consumers, firms, and products and the environment in which they make decisions. We summarize this information as follows. 1.1.1. The economic environment. The actions taken by any agent depend on the opportunities presented to that agent. These opportunities depend on the economic environment of the ...

When the trading process is characterized by search frictions, traders may be rationed so markets need not clear. We build a general equilibrium model with transferable utility where the uncertainty arising from rationing is incorporated in the definition of a commodity, in the spirit of the Arrow–Debreu theory. Prices of commodities then depend not only on their physical characteristics, but a...