By E. Roy Weintraub (auth.)
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Extra resources for General Equilibrium Theory
Patinkin, Money, Interest, and Prices, 2nd edition (Harper & Row, New York, 1965).  G. L. S. Shackle, The Tears of High Theory (Cambridge University Press, 1967). [39J R. W. Clower, 'The Keynesian Counter-revolution: A Theoretical Appraisal', in The Theory of Interest Rates, ed. F. Hahn and F. Brechling (Macmillan, London, 1965).  F. Hahn, 'On Some Problems of Proving the Existence of and Equilibrium in a Monetary Economy', in Hahn and Brechling (see [39J).  D. Jsis Without Measurement (unpublished).
Below x, which lies on the line XoX. Choose P to be half of XoQ.. Drop perpendiculars from P and Q. to the line OAXo to locate S and R. Thus XeS is half XoR, and SP is half RQ.. Let trader BIZ offer the following exchange: BIZ will give up RQ. of good 2 in exchange for xoR of good 1 where :coS is supplied by each of As and A,. Both A. and A, thus supply xoS and receive SP. But since P lies on a higher indifference curve than x, each A trader is better off under this allocation. Trader BIZ supplies RQ.
Some indeterminacy is present: without an external mechanism to fix the equilibrium, the solution is incomplete. It may be argued, for instance, that points on the contract curve near A's original indifference curve represent little gain from trade for A, and a large gain for B. Thus bargaining strength might settle the ultimate outcome. For this reason, the wntract curve is called, by some, the conflict curve. Forgoing this approach, though, there still remain natural mechanisms to determine the outcome.
General Equilibrium Theory by E. Roy Weintraub (auth.)