Economics Letters 22 (1986) 107-110 707

North-Holland

A NOTE ON THE GALE-NIKAIDO-DEBREU LEMMA

AND THE EXISTENCE OF GENERAL EQUILIBRIUM

Monique FLORENZANO and Cuong LE VAN

CEPR EMA P. 75013 Paris, France

Received 17 July 1986

In this note, we give another version of the generalized Gale-Nikaido-Debreu lemma which has as direct corollary the usual
statement without weakening any conclusion. We give also another simple way for discarding free disposability.

In a paper published in 1982, one of the two authors of this note gave a lemma presented as the
most convenient version for applications in general equilibrium theory of the generalized statement
of the Gale-Nikaido-Debreu lemma:

Lemma I (Florenzano). Let P be a closed convex cone with vertex 0 in R’, B the closed ball with
center 0 and radius 1, S the sphere with same center and same radius and 1 an upper semi-continuous
and non-empty, compact convex-valued correspondence from B n P into R’. If [ satisfies the condition

VpESnP, 3ZE{(P), p*z<o,

then there exists j? E B n P such that l(j) n P” Z q, where

A very simple proof of Lemma 1 was based upon the Brouwer’s fixed-point theorem and the
concept of partition of unity subordinated to a covering. It was evident from the proof that { does
not need to be compact-valued but only such that l(p) - P” is closed for each p in B f~ P. In
particular, if P is the whole space (PO = {0}), we had as corollary:

Corollary 1 (Cornet). If 1 is an upper semi-continuous and non-empty, closed convex-valued correspon-

dence from B into [WI, satisfying the condition

V’pES, jZE{(P), p.z<o,

then there exists j E B such that 0 E l(p).

Note also that the point p, of which Lemma 1 and Corollary 1 demonstrate the existence, is not
proved # 0. Actually, one can easily check that 0 is the unique point j7 E B such that 0 E l(p),
where l(p) = { -p} for every p E B, and thus verifies the assumptions of Corollary 1. This

01651765/86/$3.50 c 1986, Elsevier Science Publishers B.V. (North-Holland)

weakening of conclusion of Lemma 1 with regard to the statement of Debreu (1956) was presented in
the JME (1982) paper as the counterpart of the advantage of not leaving out the case where P is a
linear subspace of R’.
The aim of this note is to state a corollary of Lemma 1 which allows to deduce the standard
statement of the Gale-Nikaido-Debreu lemma without any weakening of the conclusion.

Corollary 2 (Le Van). Under the assumptions of Lemma 1 on B, S and P, let Q be a closed subset of
B n P containing S n P and such that there exists a retraction r from B onto Q. If [ is an upper
semi-continuous and non-empty, compact convex-valued correspondence from Q into I?%‘,satisfying the
condition

VpESnP, 3zE{(p), p.z<o,

then there exists p E Q such that l(p) f’ P0 Z @.

Proof Let {‘: B n P + [w’ be defined by {‘( p) = {(r(p)). Since r is continuous, {’ is upper
semi-continuous. Since the restriction r/Q is the identity Q --$ Q, {’ satisfies the condition

VpESnP, ~zE{(~)=('(P), p.220

By Lemma 1, there exists p E B n P such that l’(p) n P” f fl; 5 = r(p) E Q and satisfies
$(p)nP%@ Q.E.D.

It should be emphasized that Lemma 1 can be deduced from Corollary 2. Indeed, if Q = B n P, Q is

a closed convex subset of R and the projection of lR on Q is a retraction from B onto Q. A direct
proof of Corollary 2 could be based on degree theory and would give an alternative proof of
Lemma 1.

Corollary 3 (Debreu). Let P be a closed convex cone with vertex 0 in Iw’ which is not a lineur subspace;
let PO, B and S be as in Lemma 1. If [ is an upper semi-continuous and non-empt_y, compact
convex-valued correspondence from S n P into Iw’ satisfying the condition

VpESnP, ~zE{(P), p.zsO,

then there exists p E S n P such that l(p) n P” Z $.

Proof Corollary 3 is deduced from Corollary 2 by proving the existence of a retraction from B onto
S n P. Firstly since B n P is convex and closed, as previously the projection of R’ on B n P is a
retraction r’ from B onto B n P. Then since P is not a linear subspace of R’, there exists a non-null
vector v E P” n (-P) [see Border (1985, Propositions 2-18)] and w = -v/II v I] E S n P n (-PO), If
x E B n P, let r(x) be the unique point of S n P such that r(x) = x + X(x)w, with X(x) = -x. w +
((x . w)* + 1 - I]x (I *)l/*. One can easily see that r is a retraction from B n P onto S n P. r 0 r’ is a
retraction from B onto S n P and it follows from Corollary 2 that there exists p E S n P such that
5(p) n PO f @ Q.E.D.

Remark. Corollary 3 can be used for example if P is a closed half-space. This obvious remark
suggests a very simple trick, alternative to that one used by Bergstrom (1976), for proving the
existence of a transitive general quasi-equilibrium without free disposability.
 M. Florenznno, C. Le Vun / Existence ofgeneralequilibrium 109

A pure exchange economy 6= ((Xl, R’, w’); i = 1,. . . , m) is defined by m consumption sets
X1 c R’, for each i, a complete preorder R’ on X’ and an initial endowment o’ E R’. The strict
preference relation corresponding to R’ is

x’p’xrL e ~‘R’xl’ and not x”R’x’.

Let us define

P’( x’) = { X’I E X’ ( x”PX’ })

(fy’(x’) = { X’I E X’ 1xYx’i}.

If p E S’-’ (unit sphere of R’), we define

y’(p)= {XLEX’~p~x’~p~o~},

G’(p)={xiEX’Ip.x’<p.wl},

~i(p)=(~‘~X’)~‘~y’(p)and6’(p)~P’(x’)=~},

A quasi-equilibrium without free-disposability of 8 is ( j, X) E S” X nz ,X’ such that

Proposition I. Under the following assumptions:

HI: Vi= l,..., m, X’ is a non-empty, compact convex subset of Iw’,

HZ: Vi = 1,. . . , m, Vx’ E X’, (Pi)-‘(xl) is open in X’,

H3: Vi = l,..., m, Vx’ E X’, x’ $k Co(P’(x’)),

H4: Vi= l,..., m, W’E X’,

H.5: Zf x=(xi)ETI~J,X’, C~~~x’=E~!ro~=,Vi, Pi(x’)#$,

then there exists a quasi-equilibrium without free disposability.

ProoJ: For (p, q) E S’ (unit-sphere of RI+‘), with p E Iw’ and q E [w+, let us define

T’(p, q)= {x’EX’/p.x’IpW’+q},

8’(p, q)= {XLEX’/p*x*<pWi+q},

B’(x’) = {z’EX’/z’=Xy’+ (1 -X)x’, XE]O, 11, y’EP’(x’)},

ij(p, q)= :3(P,4)- r=llb
i /=1 1 11 X(-m}.

Using the same techniques as in Geistdoerfer-Florenzano (1982) one can show that 0 is an upper
semi-continuous correspondence from S’ n (R’ X R’ +) into [w’+l, with non-empty, compact convex-
values. One has

qp, q)ES’n(lR’xlR+), v(z, -m)E?J(p, q), p.z-mqso.

Then by Corollary 3, there exist ( p, 4) E S’ n (R’ X R +) and a negative number t such that

Thatmeans3.Y=(?)En;L,X’, suchthat?‘E$‘(p,q), Vi=l...., m,

E X’ = F o1,
t= -m.
r=l I=1

It is straightforward to show that

Vi= 1 ,..., m, p . X’ = jj . a’ + q.

Hence mq= 0 - ij= 0 *j? E S”. Finally, there exists p E S’-’ and X= (X’) E nlm_iX’ such that

Vi= 1 ,..., m, ,?Ec$(~,O)C+‘((~) and 5X’= 5~‘. Q.E.D

r=l I=1

References

Bergstrom, T.C.. 1976, How to discard free disposability At no cost, Journal of Mathematical Economics 3, 131-134.
Border, K.C., 1985, Fixed point theorems with applications to economics and game theory (Cambridge University Preab.
Cambridge).
Cornet, B.. 1975. Fixed point and subjectivity theorems for correspondences: Applications, Working paper no. 7521
(University of Paris, Dauphine. Paris).
Debreu. Cr., 1956, Market equilibrium. Proceedings of the National Academy of Sciences of the U.S.A. XLII. 876-878.
Geistdoerfer-Florenano, M.. 1982, The Gale-Nikaido-Debreu lemma and the existence of transitive equilibrium with or
without the free-disposal assumption. Journal of Mathematical Economics 9, 113-134.