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Erstellt / Aktualisiert 31.05.2019 / 06.06.2019
Lizenzierung Namensnennung - Nicht-kommerziell - Keine Bearbeitung (CC BY-NC-ND)     (Unversité de Genève, cours de Pr. Monika Mrazova)
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Fenster schliessen
Lizenzierung: Keine Angabe
Lizenzierung: Keine Angabe
Fenster schliessen

STWE: Can a Pareto efficient allocation be achieved as a competitive equilibrium?

Yes, if preferences are convex
 

Fenster schliessen

FTWE does not hold in 

the presence of externalities

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FTWE focuses on efficiency, not fairness

Allocation where one person owns everything is Pareto efficient

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The FTWE tells us that

the resulting equilibrium from these independent, self-interested and decentralised actions is efficient

This is the nature of the “Invisible Hand” of Adam Smith

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Implicit assumptions of the FTWE: Each consumer knows only

his own tastes, endowment and the market prices

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FTWE

any competitive equilibrium is Pareto efficient

Fenster schliessen

Using Walras’ Law we can show that 

if demand equals supply in one market, the same must be true in the other market.