<p>What's the difference between competitive (or Walrasian) equilibrium and Pareto optimal equilibrium. Is a price equilibrium with transfer a competetive equilibrium?</p>

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2023-02-16T12:59:20.490Z
"Pareto-optimal" is its own definiton. An equilibrium allocation can be Pareto-optimal.
Giskard
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2023-02-16T13:01:20.270Z
You might consider [searching](https://economics.stackexchange.com/search?q=Pareto+optimal+equilibrium) the already existing questions.
Giskard
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2023-02-16T13:01:30.793Z
Does this answer your question? [Why is Pareto efficiency not always equitable or equilibrium?](https://economics.stackexchange.com/questions/25229/why-is-pareto-efficiency-not-always-equitable-or-equilibrium)
Giskard
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2023-02-16T13:28:56.227Z
But I did not find an answer in your suggestions. A Walrasian (or competitive) equilibrium is a special case of a price equilibrium with transfers. It is a general equilibrium approach. An allocation is Pareto optimal if there is no other feasibile allocation that pareto dominates it. The allocation of a Walrasian equilibrium, under some conditions (first foundamental theorem), is Pareto optimal. But a Walrasian equilibrium and Pareto optimal allocation seems to be the same. What am I missing?
Dimitru
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2023-02-16T13:53:05.200Z
@Giskard is that because Pareto optimality is a concept coming from the social planner's problem, and so of a centralized equilibrium? And so, under the assumptions of the first welfare theorem (perfect competition, no externalities, no public goods, and local-non satiation of preferences), we get that a market based equilibrium (decentralized equilibrium) corresponds to a Pareto optimal equilibrium?
Dimitru
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2023-02-16T14:14:54.403Z
"*Walrasian equilibrium and Pareto optimal allocation seems to be the same.*" How so...? Pareto optimality doesn't even suppose any individual endowments, while equilibrium does. The first welfare theorem indeed states that under certain conditions all Walrasian equilibria are Pareto-optimal.
Giskard
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2023-02-16T14:31:52.163Z
@Giskard. Thanks for your reply. Maybe, I got it. Pareto optimality is a property of a feasibile allocation, where we do not consider any individual endowment, or distributional issue. Whereas, a Walrasian equilibrium is a market based equilibrium with an initial endowment of commodities and shares of firms. Is that correct? Btw, you can also give a formal answer so that I can vote it
Dimitru
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2023-02-16T15:32:57.580Z
You can vote for my explanation [here](https://economics.stackexchange.com/a/25235/1601) (:
Giskard
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2023-02-16T15:36:59.813Z
Done right now! Just a remark: do you agree with me about my last point?
Dimitru
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2023-02-16T15:48:34.393Z
Yes, that is why I 'upvoted' the comment. The phrasing is a little strange to me, but I think we mean the same thing.
Giskard
<microeconomics><general-equilibrium>
Competitive equilibrium vs Pareto optimal
Dimitru
# Competitive equilibrium vs Pareto optimal

(Asked by: username_0 on 2023-02-16)

What's the difference between competitive (or Walrasian) equilibrium and Pareto optimal equilibrium. Is a price equilibrium with transfer a competetive equilibrium?

**Tags:** microeconomics, general-equilibrium

> **Comments:**
> **username_1**: "Pareto-optimal" is its own definiton. An equilibrium allocation can be Pareto-optimal.  
> **username_1**: You might consider [searching](https://economics.stackexchange.com/search?q=Pareto+optimal+equilibrium) the already existing questions.  
> **username_1**: Does this answer your question? [Why is Pareto efficiency not always equitable or equilibrium?](https://economics.stackexchange.com/questions/25229/why-is-pareto-efficiency-not-always-equitable-or-equilibrium)  
> **username_0**: But I did not find an answer in your suggestions. A Walrasian (or competitive) equilibrium is a special case of a price equilibrium with transfers. It is a general equilibrium approach. An allocation is Pareto optimal if there is no other feasibile allocation that pareto dominates it. The allocation of a Walrasian equilibrium, under some conditions (first foundamental theorem), is Pareto optimal. But a Walrasian equilibrium and Pareto optimal allocation seems to be the same. What am I missing?  
> **username_0**: @username_1 is that because Pareto optimality is a concept coming from the social planner's problem, and so of a centralized equilibrium? And so, under the assumptions of the first welfare theorem (perfect competition, no externalities, no public goods, and local-non satiation of preferences), we get that a market based equilibrium (decentralized equilibrium) corresponds to a Pareto optimal equilibrium?  
> **username_1**: "*Walrasian equilibrium and Pareto optimal allocation seems to be the same.*" How so...? Pareto optimality doesn't even suppose any individual endowments, while equilibrium does. The first welfare theorem indeed states that under certain conditions all Walrasian equilibria are Pareto-optimal.  
> **username_0**: @username_1. Thanks for your reply. Maybe, I got it. Pareto optimality is a property of a feasibile allocation, where we do not consider any individual endowment, or distributional issue. Whereas, a Walrasian equilibrium is a market based equilibrium with an initial endowment of commodities and shares of firms. Is that correct? Btw, you can also give a formal answer so that I can vote it  
> **username_1**: You can vote for my explanation [here](https://economics.stackexchange.com/a/25235/1601) (:  
> **username_0**: Done right now! Just a remark: do you agree with me about my last point?  
> **username_1**: Yes, that is why I 'upvoted' the comment. The phrasing is a little strange to me, but I think we mean the same thing.  

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## 0 answers

