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Simple Economies with Multiple Equilibria

Author

Listed:
  • Bergstrom Theodore C

    (University of California, Santa Barbara)

  • Shimomura Ken-Ichi

    (Kobe University)

  • Yamato Takehiko

    (Tokyo Institute of Technology)

Abstract

We study a general class of pure exchange economies that have multiple equilibria. This class generalizes an example presented by Shapley and Shubik. For such economies, we find easily verified conditions that determine whether there are multiple equilibria. We also provide simple methods for constructing economies in which arbitrary pre-specified sets of prices are equilibria. These economies have strong comparative statics properties, since prices at interior competitive equilibrium depend on the parameters of utility but not on the endowment quantities. We believe that this easily manipulated special case is a valuable addition to the class of simple general equilibrium economies that can be used as testing grounds in economic theory.

Suggested Citation

  • Bergstrom Theodore C & Shimomura Ken-Ichi & Yamato Takehiko, 2009. "Simple Economies with Multiple Equilibria," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-31, December.
    • Handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:43
    DOI: 10.2202/1935-1704.1609
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    References listed on IDEAS

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    1. Shapley, Lloyd S & Shubik, Martin, 1977. "An Example of a Trading Economy with Three Competitive Equilibria," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 873-875, August.
    2. Kumar, Alok & Shubik, Martin, 2003. "A computational analysis of core convergence in a multiple equilibria economy," Games and Economic Behavior, Elsevier, vol. 42(2), pages 253-266, February.
    3. Gjerstad, S., 1996. "Multiple Equilibria in Exchange Economies with Homothetic, Nearly Identical Preferences," Papers 288, Minnesota - Center for Economic Research.
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    Cited by:

    1. Sean Crockett & Ryan Oprea & Charles Plott, 2011. "Extreme Walrasian Dynamics: The Gale Example in the Lab," American Economic Review, American Economic Association, vol. 101(7), pages 3196-3220, December.
    2. Juergen Huber & Martin Shubik & Shyam Sunder, 2009. "Default Penalty as a Disciplinary and Selection Mechanism in Presence of Multiple Equilibria," Cowles Foundation Discussion Papers 1730, Cowles Foundation for Research in Economics, Yale University.
    3. Norman, Thomas W.L., 2020. "Market selection with an endogenous state," Journal of Mathematical Economics, Elsevier, vol. 91(C), pages 51-59.
    4. Juergen Huber & Martin Shubik & Shyam Sunder, 2011. "Default Penalty as a Selection Mechanism Among Multiple," Levine's Working Paper Archive 786969000000000060, David K. Levine.
    5. Huber, Juergen & Shubik, Martin & Sunder, Shyam, 2016. "Default penalty as a selection mechanism among multiple equilibria," Journal of Behavioral and Experimental Finance, Elsevier, vol. 9(C), pages 20-38.
    6. Giménez, Eduardo L., 2022. "Offer curves and uniqueness of competitive equilibrium," Journal of Mathematical Economics, Elsevier, vol. 98(C).

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    More about this item

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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