Arrow–Debreu model

In mathematical economics, the Arrow–Debreu model is a theoretical general equilibrium model. It posits that under certain economic assumptions (convex preferences, perfect competition, and demand independence), there must be a set of prices such that aggregate supplies will equal aggregate demands for every commodity in the economy.

The model is central to the theory of general (economic) equilibrium, and it is used as a general reference for other microeconomic models. It was proposed by Kenneth Arrow, Gérard Debreu in 1954, and Lionel W. McKenzie independently in 1954, with later improvements in 1959.

The A-D model is one of the most general models of competitive economy and is a crucial part of general equilibrium theory, as it can be used to prove the existence of general equilibrium (or Walrasian equilibrium) of an economy. In general, there may be many equilibria.

Arrow (1972) and Debreu (1983) were separately awarded the Nobel Prize in Economics for their development of the model. McKenzie, however, did not receive the award.

This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.