Bargaining-Equilibrium Equivalence

The paper tries to answer one of the more nascent questions in the literature on general equilibrium theory by investigating the equivalence between the set of club equilibrium states and the bargaining set for a club economy. Clubs in this framework are treated in a parallel fashion to private goods as articles of choice. Each club membership is composed of three components: (i) the individual's characteristics; (ii) the profile of the club. and (iii) the club project. Thus clubs are identified through their profile and the particular project they undertake. We introduce the bargaining set for such an economy in lieu of Mas-Colell [22] and define a two-step veto mechanism. In this paper we establish that non-equilibrium states are those against which there exist a set of agents who agree upon a mutually beneficial trade agreement amongst themselves or in other words there exists a Walrasian objection to such states. In what follows from the literature is that Walrasian objections are justified as well which thereby helps us establish our equivalence between the set of club equilibrium states and the bargaining set for a club economy