Arrow-Debreu Model of General Equilibrium
|Author:||Bc. Filip Juřena|
|Year:||2015 - summer|
|Leaders:|| RNDr. Michal Červinka Ph.D.
|Work type:|| Bachelors
|Awards and prizes:|
|Abstract:||In this thesis, we deal with the Arrow-Debreu model of general equilibrium, which is an
integrated model of production, exchange and consumption.
At the beginning, we present and discuss the original assumptions of the Arrow-Debreu
model, i.e. the assumptions introduced by Kenneth J. Arrow and Gerard Debreu in 1954.
Under these assumptions, Arrow and Debreu proved the existence of a general equilibrium.
As a part of the proof, Arrow and Debreu showed that the equilibria of their model
are the same as the equilibria of an abstract economy, or a generalized Nash equilibrium
problem (GNEP). We describe the GNEP and look at whether there is a connection which
allows to apply results developed by researchers from other disciplines to the Arrow-Debreu
A part of the thesis is dedicated to a two-factor, two-commodity, two-consumer model,
which is based on the original assumptions of Arrow and Debreu. In order to find the
solution, we use a method called applied general equilibrium modelling and a software
called GAMS. We examine the impact of better technology and taxes on consumers and
We have brief remarks on applications of the model at the end.