Dynamic Adjustment of Supply Constrained Disequilibria to Walrasian Equilibrium
AbstractIt is well-known that the classical Walrasian tatonnement process of adjusting prices does not need to converge.In several papers Weddepohl has shown cyclic or even chaotic behavior in discrete time tatonnement processes.Starting from a trivial non-trade disequilibrium with complete rationing on the supplies at a given vector of initial prices, a quantity and price adjustment process is proposed, converging always to a Walrasian equilibrium.At any price and rationing system generated by the process all markets clear, only supply rationing occurs, in the short run only rationing schemes are adjusted and in the long run both prices and rationings are adjusted.Furthermore, prices can only take values equal or above their initial values, while supply rationing only may occur when the corresponding price is on its initial value.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2002-61.
Date of creation: 2002
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Other versions of this item:
- Laan, G. van der & Talman, A.J.J., 2002. "Dynamic adjustment of supply constrained disequilibria to Walrasian equilibria," Open Access publications from Tilburg University urn:nbn:nl:ui:12-89455, Tilburg University.
- NEP-ALL-2002-08-19 (All new papers)
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