The Arrow-Debreu model, also referred to as the Arrow-Debreu-McKenzie model suggests that, should the assumptions made about the conditions under which it works hold (i.e. convexity, perfect competition and demand independence), then there will be a set of prices such that aggregate supplies will equal aggregate demands for every commodity in the economy.

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  • The Arrow-Debreu model, also referred to as the Arrow-Debreu-McKenzie model suggests that, should the assumptions made about the conditions under which it works hold (i.e. convexity, perfect competition and demand independence), then there will be a set of prices such that aggregate supplies will equal aggregate demands for every commodity in the economy. The model (ADM model) is the central model in the General (Economic) Equilibrium Theory and often used as a general reference for other microeconomic models. It is named after Kenneth Arrow, Gerard Debreu and Lionel W. McKenzie. Compared to earlier models, the Arrow-Debreu model radically generalized the notion of a commodity, differentiating commodities by time and place of delivery. So, for example, 'apples in New York in September' and 'apples in Chicago in June' are regarded as distinct commodities. The Arrow-Debreu model applies to economies with maximally complete markets, in which there exists a market for every time period and forward prices for every commodity at all time periods and in all places. The ADM model is one of the most general models of competitive economy and is a crucial part of general equilibrium theory, as it can be used to prove the existence of general equilibrium of an economy. Once we can prove the existence of such an equilibrium, it is possible to show that it is unique.
  • Das Arrow-Debreu-Modell ist ein Modell innerhalb der allgemeinen Gleichgewichtstheorie, benannt nach Kenneth Arrow und Gerard Debreu. Es erweitert die Gleichgewichtsanalyse für vollkommene Märkte auf den Fall unsicherer Erwartungen und zeigt, dass es auch auf Güter- und Kapitalmärkten, auf denen Wettbewerb herrscht, zu einer Pareto-optimalen Güter- und Risikoallokation kommt. Die Einführung von zustandabhängigen Ansprüchen ist für die Finanzierungstheorie von großer Bedeutung.
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  • The Arrow-Debreu model, also referred to as the Arrow-Debreu-McKenzie model suggests that, should the assumptions made about the conditions under which it works hold (i.e. convexity, perfect competition and demand independence), then there will be a set of prices such that aggregate supplies will equal aggregate demands for every commodity in the economy.
  • Das Arrow-Debreu-Modell ist ein Modell innerhalb der allgemeinen Gleichgewichtstheorie, benannt nach Kenneth Arrow und Gerard Debreu. Es erweitert die Gleichgewichtsanalyse für vollkommene Märkte auf den Fall unsicherer Erwartungen und zeigt, dass es auch auf Güter- und Kapitalmärkten, auf denen Wettbewerb herrscht, zu einer Pareto-optimalen Güter- und Risikoallokation kommt. Die Einführung von zustandabhängigen Ansprüchen ist für die Finanzierungstheorie von großer Bedeutung.
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  • Arrow-Debreu model
  • Arrow-Debreu-Modell
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