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A Walrasian auction, introduced by Léon Walras, is a type of simultaneous auction where each agent calculates its demand for the good at every possible price and submits this to an auctioneer. The price is then set so that the total demand across all agents equals the total amount of the good.
Competitive equilibrium (also called: Walrasian equilibrium) is a concept of economic equilibrium, introduced by Kenneth Arrow and Gérard Debreu in 1951, [1] appropriate for the analysis of commodity markets with flexible prices and many traders, and serving as the benchmark of efficiency in economic analysis.
The Walrasian auction is a type of simultaneous auction where each agent calculates its demand for the good at every possible price and submits this to an auctioneer. The price is then set so that the total demand across all agents equals the total amount of the good. Thus, a Walrasian auction perfectly matches the supply and the demand.
Walras's law is a consequence of finite budgets. If a consumer spends more on good A then they must spend and therefore demand less of good B, reducing B's price. The sum of the values of excess demands across all markets must equal zero, whether or not the economy is in a general equilibrium.
General equilibrium theory is a central point of contention and influence between the neoclassical school and other schools of economic thought, and different schools have varied views on general equilibrium theory. Some, such as the Keynesian and Post-Keynesian schools, strongly reject general equilibrium theory as "misleading" and "useless".
Auction theory is a branch of applied economics that deals with how bidders act in auctions and researches how the features of auctions incentivise predictable outcomes. Auction theory is a tool used to inform the design of real-world auctions. Sellers use auction theory to raise higher revenues while allowing buyers to procure at a lower cost.
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Theorem — Let be a positive integer. If : {: =,, >} is a continuous function that satisfies Walras's law, then there exists an economy with households indexed by , with no producers ("pure exchange economy"), and household endowments {} such that each household satisfies all assumptions in the "Assumptions" section, and is the excess demand function for the economy.