The Influence of Price Constraints on Optimal Resource Allocation

This paper examines a model of a closed exchange economy, analyzing various operations undertaken by economic agents. Specifically, it considers scenarios where price constraints are imposed on resource goods, alongside certain constraints on the quantities of exchanged commodities. Such approaches to studying economic processes are motivated by production, economic, and political factors. Typically, and particularly in this work, analysis frameworks in economies of this type enable the identification of a resource subset under natural conditions and ensure that the allocation of goods does not result in an “excessively poor” distribution. In this study, both resource and price constraints are modeled as cones, facilitating their application to economies characterized by growth. The existence of equilibrium, understood in the conventional sense, is proven. Unlike classical cases, this work allows for non-convexities in the preference relations of certain consumer types. It is established that strengthening price and resource constraints enables a greater relaxation of the consumer preference convexity condition.