Algorithmic models of market equilibrium
AbstractIn this paper we suggest a new framework for constructing mathematical models of market activity. Contrary to the majority of the classical economical models (e.g. Arrow- Debreu, Walras, etc.), we get a characterization of general equilibrium of the market as a saddle point in a convex-concave game. This feature significantly simplifies the proof of existence theorems and construction of the adjustment processes both for producers and consumers. Moreover, we argue that the unique equilibrium prices can be characterized as a unique limiting point of some simple price dynamics. In our model, the equilibrium prices have natural explanation: they minimize the total excessive revenue of the market’s participants. Due to convexity, all our adjustment processes have unambiguous behavioral and algorithmic interpretation. From the technical point of view, the most unusual feature of our approach is the absence of the budget constraint in its classical form.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2013066.
Date of creation: 31 Dec 2013
Date of revision:
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general equilibrium theory; convex optimization; price mechanism; budget constraint;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-08 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- DEBREU, Gérard, .
"Economies with a finite set of equilibria,"
CORE Discussion Papers RP
-67, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
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