Characterising competitive equilibrium in terms of opportunity

Abstract

This paper analyses alternative profiles of opportunity sets for individuals in an exchange economy, without assuming that individuals' choices reveal coherent preferences. It introduces the concept of a 'market-clearing single-price regime', representing a profile of opportunity sets consistent with competitive equilibrium. It also proposes an opportunity-based normative criterion, the Strong Opportunity Criterion, which is analogous with the core in preference-based analysis. It shows that every market-clearing single-price regime satisfies the Strong Opportunity Criterion and that, in the limit as an economy is replicated, only such regimes have this property.

The market, utilitarianism and the corruption argument

“…But going further, one might want to drop even the requirement that preferences are rational in the weaker sense that I have just explained-because of experimental work which suggests that preferences may not even be coherent. That is the approach which (Sugden 2004(Sugden , 2017; see also McQuillin and Sugden 2012) takes in recent defences of the market based on the 'opportunity criterion'. Sugden's view is also interestingly different from those who advance the informed preference view.…”

Opportunity and Preference Learning

“…As he shows in (Sugden 2004a), in a simple model of an exchange economy, the opportunity criterion is satisfied if the law of one price holds and if all markets clear. The model presented there is extended in McQuillin and Sugden (2012) and Sugden (2014).…”