Optimization and Economic Equilibrium.

Abstract: In the standard theory of economic equilibrium, various “agents” optimize what they want to buy and sell in order to adjust their holdings on the basis of given prices and associated budget constraints. Their decisions depend on preference relations that are representable nonuniquely by utility functions on the space of goods vectors.  The standard question posed by economists is whether prices exist under which the resulting total demands of the agents are matched by total supplies.  Equilibrium is a state in which, at the given prices, no agent wants to buy or sell anything.   But the treatment of equilibrium in the literature is far from satisfactory, in particular in failing to offer a convincing economic mechanism by which equilibrium could be achieved and how it might respond to perturbations.

This talk will explain new developments that approach the topic in a different way that takes advantage of simple features of convex optimization and better knowledge of utility functions.

Posted on Nov 10, 2022 in Optimization and Equilibrium, Seminars