Consider an economy with one public enterprise that is subject to a budgetary constraint and charges prices according to the first-order necessary conditions suggested by M. Boiteux (1956) or F. P. Ramsey (1927). The authors state conditions sufficient to ensure that the resulting allocation is second best. The proof builds on arguments used to demonstrate the Pareto efficiency of marginal cost pricing under appropriate assumptions.

[Economies with indivisible commodities admit allocations that are nearly price equilibria, provided that the number of agents is large relative to the number of commodities. In the course of the proof, it is shown that a similar result is valid if agents are insensitive to small price changes.]

[We shall present an alternative proof of G. Debreu's theorem on the finiteness of the set of equilibria [1], and some related new results. The set of economies with finitely many equilibria is dense with respect to a very weak topology on the set of exchange economies. The equilibrium correspondence and the number of equilibria are continuous with respect to a strong topology on the set of regular economies where "regular" is defined as in [1]. Perhaps the methods used in this paper are more interesting than the results. The key concept we use is that of transversality. The essential regularity property of regular economies is that their excess demand functions are transversal to zero.]

IN THIS PAPER, we study the existence of a general equilibrium in an economy in which some of the firms behave competitively, whereas others follow special pricing rules. An even casual observation of economic reality confirms the need for the inclusion of price setting firms in the study of general equilibrium models. And, in fact, this has been emphasized in the economic literature for some time. We consider this a sufficient justification to present a general equilibrium model which allows for both types of behavior-price setting as well as price taking behavior. The model to be presented will account for a wide range of price setting rules. We, however, find it appropriate to point out at the start that not all economically relevant price setting rules are covered. Although our model permits the drawing of useful conclusions for the general equilibrium theory of oligopolistic competition through prices, it is not especially designed for that purpose. In particular, our results are not applicable to the general equilibrium analysis with price making monopolistic firms, a subject on which there exists some literature.2 Our motivation as well as our modelling options and assumptions are directed to two fields where an increased interest in the theoretical foundations recently could be noticed.