2022/10/26 by Jacob K. Goeree, Goeree, Jacob K
Economics, Econometrics and Finance · #Economic Theory and Institutions #Economic theories and models #FOS: Economics and business #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2210.14437
openalex publication_date 2022/10/26 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
I introduce a concave function of allocations and prices -- the economy's potential -- which measures the difference between utilitarian social welfare and its dual. I show that Walrasian equilibria correspond to roots of the potential: allocations maximize weighted utility and prices minimize weighted indirect utility. Walrasian prices are "utility clearing" in the sense that the utilities consumers expect at Walrasian prices are just feasible. I discuss the implications of this simple duality for equilibrium existence, the welfare theorems, and the interpretation of Walrasian prices.