Anthony Horsley and Andrew J Wrobel

Published 1996

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Many consumption/production processes cannot be interrupted without significant loss of utility/ouput. In continuous-time equilibrium analysis, the structure of the demand for flows that results can lead to prices containing, in addition to charge accumulating over time at a finite rate, other charges which are concentrated in time and, in extreme cases, levied instantaneously. Mathematically, rates can be represented by the price densities familiar from Bewley's model, but instantaneous charges can be adequately represented only by pure-point measures. This means using the space of measures for price systems, and the space of continuous functions for commodity bundles. The known difficulties with equilibrium existence for this commodity space are removed by the local compactness properties of the feasible consumption/production sets (which hold in the case of utility/output derived only from completed processes).