Econometrica: Jul, 1985, Volume 53, Issue 4

Voluntary and Efficient Allocations are Walrasian

https://doi.org/0012-9682(198507)53:4<807:VAEAAW>2.0.CO;2-D
p. 807-816

Joaquim Silvestre

Let E be a private ownership economy. Call an allocation w "voluntary for a price vector p" if no agent can benefit by trading less at p. We prove that, under differentiability and interiority, if w is voluntary and Pareto efficient it is a competitive equilibrium for E. Perhaps surprisingly, production economies where some agents receive profit income require a stronger voluntariness condition than the one sufficient for exchange economies. The stronger condition singles out a commodity as a medium of exchange.