Named after American economist Kenneth Arrow (1921- ) and French-born economist Gerard Debreu (1921- ), who examined the dynamics of the whole economic system and were able to prove the existence of a multimarket equilibrium in which no excess demand or supply exists.
The theory is based on two assumptions:
First, that a competitive equilibrium exists if each person in the economy possesses some quantity of every good available for sale in that market;
Second, that exploitable labor resources exist which are capable of being used in the production of desired goods/services.
Arrow-Debreu Model is considered to have been a major advance in economic theory.
K J Arrow and G Debreu, 'The Existence of an Equilibrium for a Competitive Economy' Econometrica, vol. XXII (1954), 265-90
Y Balasko, Foundations of the Theory of General Equilibrium (New York, 1986)