Symmetric smooth consumption externalities

Abstract

Based on Arrow's model of a pure exchange economy with smooth consumption externalities, this paper studies how the internalization of external effects through a network of markets between agents introduces symmetry breakings in the set of equilibria. It shows indeed how identical agents can be treated asymmetrically by complete markets. This work emphasizes that equilibrium allocations may be very sensitive to the way Coase-type rights are distributed: Journal of Economic Literature Classification Numbers: D50, D62, H23, K11. © 1996 Academic Press, Inc.