Economic equilibrium and financial networks

Economic equilibrium and financial networks

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Article ID: iaor20012362
Country: Netherlands
Volume: 30
Issue: 7/8
Start Page Number: 1
End Page Number: 6
Publication Date: Jul 1999
Journal: Mathematical and Computer Modelling
Authors:
Abstract:

In this paper, we consider the general economic equilibrium problem in which each agent seeks to determine his optimal composition of commodities given a fixed budget and a fixed number of each commodity in the economy. We construct the network underlying each agent's optimization problem and then derive the equilibrium conditions and the equivalent variational inequality formulation. We present certain qualitative properties of the equilibrium pattern and identify the financial network that represents the system in equilibrium. Finally, we provide a numerical example illustrating the model. This work bridges general economic equilibrium and financial networks.

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