Existence of a Short-Run Equilibrium of the Dixit-Stiglitz-Krugman Model

Abstract EN

Each short-run equilibrium of the Dixit-Stiglitz-Krugman model is defined as a solution to the wage equation when the distributions of workers and farmers are given functions.

We extend the discrete nonlinear operator contained in the wage equation as a set-valued operator.

Applying the Kakutani fixed-point theorem to the set-valued operator, under the most general assumptions, we prove that the model has a short-run equilibrium.