Yves Balasko
Professor of Economics
Department of Economics and Related Studies
Heslington, York YO10 5DD
contact: yb501@york.ac.uk
Selected Publications:
"On the necessity of market interventions: A general equilibrium
analysis," preprint, June 2010; "Pareto improving default," (with
Enrique Kawamura), preprint, April 2010; "On the stability of
nonsunspot equilibria," preprint, June 2009; "General equilibrium
without utility functions: How far to go?" (with Mich Tvede, forthcoming in Economic Theory),
"The Equilibrium Manifold," MIT Press, Cambridge, MA, 2009; "Out-of-equilibrium price dynamics," Economic Theory, 33, 2007; "Economies with price-dependent preferences," Journal of Economic
Theory, 109, 2003; "Temporary financial equilibria,'' Economic Theory, 21, 2003; "The natural projection approach to the infinite horizon model," Journal of Mathematical
Economics, 27, 1997; "Market participation and sunspot equilibria," with David Cass and Karl Shell, Review
of Economic Studies, 62, 1995; "The set of regular equilibria," Journal
of Economic Theory, 58, 1992; "The structure of financial equilibrium with exogenous
yields: The case of incomplete markets," with David Cass, Econometrica,
57, 1989 "Foundations of the Theory of General Equilibrium," Academic
Press, Boston, 1988; "The overlapping-generations model I and II, " with Karl Shell,
Journal of Economic Theory, 23-24, 1980-1981; "Number and definiteness
of economic equilibria," Journal of Mathematical Economics, 7, 1980; "Some
results on uniqueness and on stability of equilibrium in general equilibrium
theory," Journal of Mathematical Economics, 2, 1975.
Resume (download)
Publication list (download)
Recently published :
The Equilibrium Manifold
Postmodern Developments in the Theory of General Economic Equilibrium
MIT Press
Based on the Arne Ryde Memorial Lectures 2006
Arne Ryde Foundation and University of Lund.
Recent papers:
On the necessity of market interventions: A general equilibrium analysis
Abstract: The price selection mechanism in market economies fails to be defined at critical equilibria so that crossing the critical equilibria may require market interventions like price controls. It is shown that in the general equilibrium model without sign restrictions on endowments, two arbitrary equilibria can be joined by a continuous equilibrium path that contains at most two critical equilibria. This property is strengthened by showing that regular equilibria having an index equal to one, a necessary condition for stability, can be joined by a path containing no critical equilibrium, which proves that market interventions should not be necessary in practice. (June 2010.)
Pareto-improving default (Joint with Enrique Kawamura)
Abstract: This paper answers the question of whether non-strategic default (i.e., default as the consequence of resource uncertainty) improves the welfare, not only of borrowers with uncertain future income but also of lenders with certain future endowments, relative to the case without defaultable securities. We show that there is a set (with positive Lebesgue measure) of individual endowments such that the later is true. Numerical computations show that the size of such endowment set is larger the larger are both the risk aversion and the probability of the bad future state. Other numerical examples show that in such Pareto- superior equilibrium lenders may nance the purchase of defaultable assets by selling short default-free assets. This portfolio reminds those of important hedge-funds such as LTCM. (April 2010.)
On the stability of nonsunspot equilibria
Abstract: This paper analyzes the stability of the (Pareto efficient) nonsunspot equilibria as a function of the constraints faced by consumers in their ability to transfer wealth between states of nature. The nonsunspot equilibria are independent of the constraints since they can be identified to the equilibria of the associated certainty economy. It is shown that the equilibria that are stable for the certainty economy define nonsunspot equilibria that are stable in the following two polar cases: 1)~All consumers are unconstrained; 2)~All consumers are fully constrained. Furthermore, the stable certainty equilibria with small trade vectors define nonsunspot equilibria that are stable independently of the constraint levels. Instability can develop for intermediate constraint levels only at nonsunspot equilibria that feature sufficiently large trade vectors. A small change in the constraint levels may then trigger a jump from a Pareto efficient nonsunspot equilibrium to a Pareto inefficient sunspot equilibrium. (June 2009.)
General equilibrium without utility functions: How far to go? (Joint with Mich Tvede)
Abstract: How far can we go in weakening the assumptions of the general equilibrium model? Existence of equilibrium, structural stability and finiteness of equilibria of regular economies, genericity of regular economies and an index formula for the equilibria of regular economies have been known not to require transitivity and completeness of consumers' preferences. We show in this paper that if consumers' non-ordered preferences satisfy a mild version of convexity already considered in the literature, then the following properties are also satisfied: 1) the smooth manifold structure and the diffeomorphism of the equilibrium manifold with a Euclidean space; 2) the diffeomorphism of the set of no-trade equilibria with a Euclidean space; 3) the openness and genericity of the set of regular equilibria as a subset of the equilibrium manifold; 4) for small trade vectors, the uniqueness, regularity and stability of equilibrium for two version of tatonnement; 5) the pathconnectedness of the sets of stable equilibria. (This version: August 2008, revised July 2009. Forthcoming in Economic Theory.)
Out-of-equilibrium price dynamics
Abstract: A trading-post organization of exchange is shown to determine an out-of-equilibrium price dynamics. The unique equilibrium of quasi-linear economies (defined by log-linear utility functions) is stable for the discrete time version of the dynamics. Equilibria that are stable for the continuous time version include those that satisfy the gross-substitutability property, the no-trade equilibria and, more generally, those for which trade intensity is relatively small. In addition, the set of stable equilibria is path-connected when endowments are allowed to vary without sign restrictions. (Published in Economic Theory, 2007.)
On the satisfaction of peak demand in the certainty case
Abstract: The concept of full-capacity flat-rate equilibrium is explored for a version of the Arrow-Debreu model with time-differentiated goods and production subject to a capacity constraint. The corresponding equilibrium allocations are shown to be inefficient in general. It is also shown that rationing peak-demand is Pareto superior to non-rationing. (Published in the Journal of Mathematical Economics, 2008.)
Economies with price-dependent preferences
Abstract: Except existence, not much is known of economies where individual preferences are affected by prices. We show that the main properties of competitive equilibria that fall under the general heading of qualitative comparative statics remain true when preferences are price dependent, provided that the total resources are allowed to vary in the parameter space. The equilibrium set is a smooth manifold diffeomorphic to a Euclidean space; the natural projection is a smooth proper map, with topological degree one; equilibria always exist, and are locally unique for an open and dense set of economies. (Published in the Journal of Economic Theory, 2003.)