Stability of the Market Economy in the Presence of Diverse Economic Agents
AbstractThe stability of market economy is defined and stability conditions deduced which do not appear to restrict preferences in any significant manner. This assumes importance when considering economies where diversity among agents is known to exist. It is shown that if a condition on the rank of the Jacobian matrix of the excess demand functions at equilibria is satisfied then equilibria will be locally asymptotically stable. When this condition is not met, it is shown how redistributing resources may lead to stable competitive equilibrium. It is also shown how instead of imposing credible penalties, which may cause significant incentive problems, redistributing resources may serve to provide the correct incentives to agents who otherwise might have contributed to market failure.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by JICA Research Institute in its series Working Papers with number 8.
Date of creation: 01 Mar 2010
Date of revision:
Contact details of provider:
Postal: 6th-13th floors, Shinjuku Maynds Tower, 2-1-1 Yoyogi, Shibuya-ku, Tokyo 151-8558
Web page: http://jica-ri.jica.go.jp/
More information through EDIRC
Stability of equilibrium ; diverse preferences ; redistribution of resources ; rank condition ; incentives for competitive transactions;
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.:
- Mukherji, Anjan, 1973. "On the Sensitivity of Stability Results to the Choice of the Numeraire," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 427-33, July.
- Venkatesh Bala, 1997. "A pitchfork bifurcation in the tatonnement process," Economic Theory, Springer, vol. 10(3), pages 521-530.
- Anderson, Christopher M. & Granat, Sander & Plott, Charles R. & Shimomura, Ken-Ichi, 2000.
"Global Instability in Experimental General Equilibrium: The Scarf Example,"
1086, California Institute of Technology, Division of the Humanities and Social Sciences.
- Anderson, Christopher M. & Plott, Charles R. & Shimomura, K.-I.Ken-Ichi & Granat, Sander, 2004. "Global instability in experimental general equilibrium: the Scarf example," Journal of Economic Theory, Elsevier, vol. 115(2), pages 209-249, April.
- Hildenbrand, Werner, 1983. "On the "Law of Demand."," Econometrica, Econometric Society, vol. 51(4), pages 997-1019, July.
- Anjan Mukherji, 2003. "Global Stability Conditions on the Plane," ISER Discussion Paper 0589, Institute of Social and Economic Research, Osaka University.
- Hirota, Masayoshi, 1981. "On the Stability of Competitive Equilibrium and the Patterns of Initial Holdings: An Example," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 461-67, June.
- Herbert E. Scarf, 1959. "Some Examples of Global Instability of the Competitive Equilibrium," Cowles Foundation Discussion Papers 79, Cowles Foundation for Research in Economics, Yale University.
- Anjan Mukherji, 2008. "Stability of a competitive economy: A reconsideration," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(2), pages 317-336.
- Hirota, Masayoshi & Hsu, Ming & Plott, Chrales R. & Rogers, Brian W., 2005. "Divergence, closed cycles and convergence in scarf environments: Experiments in the dynamics of general equilibrium systems," Working Papers 1239, California Institute of Technology, Division of the Humanities and Social Sciences.
- Hirota, Masayoshi, 1985. "Global stability in a class of markets with three commodities and three consumers," Journal of Economic Theory, Elsevier, vol. 36(1), pages 186-192, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Japan International Cooperation Agency Library).
If references are entirely missing, you can add them using this form.