Editing Arrow–Debreu model (section)

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{{Short description|Economic Model}}
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In [[mathematical economics]], the '''Arrow–Debreu model''' is a theoretical [[general equilibrium]] model. It posits that under certain economic assumptions ([[convex preferences]], [[perfect competition]], and demand independence), there must be a set of prices such that [[Aggregate supply|aggregate supplies]] will equal [[aggregate demand]]s for every commodity in the economy.<ref name=":0">{{cite journal | last1 = Arrow | first1 = K. J. | last2 = Debreu | first2 = G. | year = 1954 | title = Existence of an equilibrium for a competitive economy | journal = Econometrica | volume = 22 | issue =3 | pages = 265–290 | doi = 10.2307/1907353 | jstor = 1907353 }}</ref>

The model is central to the theory of [[General equilibrium|general (economic) equilibrium]], and it is used as a general reference for other microeconomic models. It was proposed by [[Kenneth Arrow]], [[Gérard Debreu]] in 1954,<ref name=":0" /> and [[Lionel W. McKenzie]] independently in 1954,<ref>{{cite journal |first=Lionel W. |last=McKenzie |title=On Equilibrium in Graham's Model of World Trade and Other Competitive Systems |journal=Econometrica |year=1954 |volume=22 |issue=2 |pages=147–161 |jstor=1907539 |doi=10.2307/1907539}}</ref> with later improvements in 1959.<ref>{{cite journal |first=Lionel W. |last=McKenzie |title=On the Existence of General Equilibrium for a Competitive Economy |journal=Econometrica |year=1959 |volume=27 |issue=1 |pages=54–71 |jstor=1907777 |doi=10.2307/1907777}}</ref><ref>For an exposition of the proof, see {{cite book |last=Takayama |first=Akira |title=Mathematical Economics |location=London |publisher=Cambridge University Press |edition=2nd |year=1985 |isbn=978-0-521-31498-5 |pages=[https://archive.org/details/mathematicalecon00taka/page/265 265]–274 |url=https://archive.org/details/mathematicalecon00taka |url-access=registration }}</ref>

The A-D model is one of the most general models of competitive economy and is a crucial part of [[general equilibrium theory]], as it can be used to prove the existence of [[general equilibrium]] (or [[Walrasian equilibrium]]) of an economy. In general, there may be many equilibria.

Arrow (1972) and Debreu (1983) were separately awarded the [[Nobel Memorial Prize in Economic Sciences|Nobel Prize in Economics]] for their development of the model. McKenzie, however, did not receive the award.<ref>{{Cite book |last1=Düppe |first1=Till |url=http://dx.doi.org/10.1515/9781400850129 |title=Finding Equilibrium |last2=Weintraub |first2=E. Roy |date=2014-12-31 |publisher=Princeton University Press |isbn=978-1-4008-5012-9 |location=Princeton|doi=10.1515/9781400850129 }}</ref>