Econometrica: Nov 1996, Volume 64, Issue 6
Testable Restrictions on the Equilibrium Manifold
Donald J. Brown, Rosa L. MatzkinWe present a finite system of polynomial inequalities in unobservable variables and market data that observations on market prices, individual incomes, and aggregate endowments must satisfy to be consistent with the equilibrium behavior of some pure trade economy. Quantifier elimination is used to derive testable restrictions on finite data sets for the pure trade model. A characterization of observations on aggregate endowments and market prices that are consistent with a Robinson Crusoe's economy is also provided.
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