Walrasian equilibria as limits of noncooperative equilibria. Part II: Pure strategies
Abstract We examine the connection between Walrasian equilibria of a limit economy (with infinitesimal firms) and noncooperative (Cournot) equilibria of approximating finite economies (with significant firms). Nonconvex production sets, decreasing returns in the aggregate, and endogenous determination of the number of active firms are allowed. A Walrasian equilibrium is a limit of pure strategy noncooperative equilibria only if a condition (loosely analogous to downward sloping demand in the partial equilibrium constant returns to scale case) holds. The condition is also sufficient to guarantee the existence of a robust sequence of pure strategy noncooperative equilibria which converges to the Walrasian equilibrium.