Existence, regularity and testability results in economic models with externalities

Abstract

This thesis deals with economic models in the presence of externalities. The thesis consists of three chapters. In chapter 1, we consider a general model of production economies with consumption and production externalities. That is, the choices of all agents (households and firms) affect individual consumption sets, individual preferences and production technologies. Describing equlibria in terms of first order conditions and market clearing conditions, and using a homotopy, under differentiability and boundary conditions, we prove the non-emptiness and compactness of the set of competitive equilibria with consumptions and prices strictly positive. In chapter 2 we consider a general model of private ownership economies with consumption and production externalities. Showing by an example that basic assumptions are not enough to guarantee a regularity result in the space of initial endowments, we provide sufficient conditions for the regularity in the space of endowments and transformation functions. In chapter 3 we study the testability implications of public versus private consumption in collective models of group consumption. To the contrary at the previous literature, we find that assumptions regarding the public or private nature of specific goods do have testability implications, even if one only observes the aggregate group consumption. In fact, these testability implications apply as soon as the analysis includes three goods and four observations. In our opinion, our revealed preference approach obtains stronger testability conclusions because it focuses on conditions which involve personalized prices and personalized quantities, although we do not require that personalized prices and personalized quantities are observable. [edited by author]