On characterizing optimal competitive programs in terms of decentralizable conditions (Q1113787)

This paper considers a multisector model of intertemporal allocation, in which there are n producible goods and one primary factor. The paper shows that if the technology is stationary and admits a unique and expansible golden rule equilibrium, it is possible to construct an informationally decentralized mechanism that is consistent with the transversality condition for intertemporal optimality. The main result states that under appropriate convexity assumptions, a program is optimal if and only if (i) there exists a price sequence such that it is competitive at the price sequence, and (ii) appropriate computed values of the differences of stocks from the golden rule level are nonpositive. This second condition replaces the standard transversality condition for intertemporal optimality. The proof is provided in detail for the undiscounted case.