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ABSTRACT:
This paper considers a credit mechanism for selecting a unique competitive equilibrium (CE). It is shown that in general there exists a “price-normalizing” bundle, with which the enlargement of the general-equilibrium structure to allow for default subject to appropriate penalties results in a construction of a simple credit mechanism for a credit using society to select a unique CE. With some additional conditions, there exists a common price-normalizing bundle with which any CE can be a unique selection for the credit mechanism with appropriate default penalties. The selection can be utilized to select a CE that minimizes the need for money or credit in trade.

SUGGESTED CITATION:
Cheng-Zhong Qin, "A Credit Mechanism for Selecting a Unique Competitive Equilibrium" (March 28, 2006). Department of Economics, UCSB. Departmental Working Papers. Paper 02-06.
http://repositories.cdlib.org/ucsbecon/dwp/02-06