SFB 303 Discussion Paper No. A-385
Author:
Hildenbrand, Werner
Title: Francis Ysidro Edgeworth: Perfect Competition and the Core
Abstract: Edgeworth's single most important contribution to economic theory,
his analysis of barter under imperfect and perfect competition,
or in today's terminology "his Limit Theorem of the core for a
sequence of replica economies" is discussed in the present paper.
The important and novel point of Edgeworth's analysis is that he
explicitly models the 'degree of competition` by the number of agents
who participate in the economy. 'Perfect competition` prevails only
'in the limit`; thus, 'perfect competition` is modelled as an asymptotic
property of a sequence of exchange economies. The concept of a
competitive equilibrium (Walras) is based on the implicit assumption
of 'perfect competition`. Since an economy with a finite number of
agents is not perfectly competitive, Edgeworth introduced a new concept
of equilibrium; the 'final settlements` or, in today's language, the
'core`. The 'Limit Theorem` expresses that under 'perfect competition`
these two equilibrium concepts coincide.
Keywords:
JEL-Classification-Number:
Creation-Date: November
1992
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