Normative Equilibrium: The permissible and the forbidden as devices for bringing order to economic environments
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Abstract

We introduce the notion of a “normative equilibrium” as a method which brings harmony to “general equilibrium” like environments where individuals make preference-maximizing choices but not every profile of choices is feasible. In an equilibrium, norms stipulate what is permissible and what is forbidden. These uniform norms play a role analogous to that of price systems in competitive equilibrium and also feature some element of “fairness” since all individuals face the same choice set. The solution concept is a maximally permissive set of alternatives that is consistent with the existence of a profile of optimal choices which is feasible. Properties of the solution concept are analysed and the concept is applied to a variety of economic settings.
Date: 8 June 2018, 14:15
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: IT Room
Speaker: Michael Richter (Royal Holloway, University of London)
Organising department: Department of Economics
Organisers: Anne Pouliquen (University of Oxford), Erin Saunders (University of Oxford)
Part of: Nuffield Economic Theory Seminar
Booking required?: Not required
Audience: Members of the University only
Editors: Erin Saunders, Anne Pouliquen, Melis Clark