The Impact of Transaction Cost on Competitive Economy

The functional relationships between the price vector and consumer's Marshallian demand and/or producer's optimal actual sale will be directly revealed respectively by two new geometric methods in general equilibrium framework without storage. The impact of transaction cost shared by individual on these functional relationships will be directly analyzed. Then, it is proved that, the demand and supply functions of different commodities will be no longer mathematically continuous, if there is a special kind of transaction cost independent of what are traded, which is mainly caused by information cost. This makes sure that the transaction cost will substantially disturb the Walrasian equilibrium without storage if non-infinitesimal fraction of population synchronously shift their decisions. And then, it is else suggested that transaction cost will dramatically cut down social welfare. Finally, a revised model with storage as a theoretic way out for Walrasian economy of zero-storage will be presented to suggest that a competitive economy with zero-storage probably isn't at Nash equilibrium