The Weak Axiom and Comparative Statics
AbstractThis paper examines conditions which guarantee that the excess demand function of an exchange economy will satisfy the weak axiom in an open neighborhood of a given equilibrium price. This property ensures that the equilibrium is locally stable with respect to Walras tatonnement. A related issue is the possibility of local comparative statics; in particular, the paper examines conditions which guarantee that when an economys endowment is perturbed, the equilibrium price will move in a direction opposite to that of the perturbation. A distinguishing feature of this papers approach is the heavy use of the indirect utility function, though we also provide results that allow for the translation of conditions imposed on indirect utility functions to conditions imposed on direct utility functions. Indeed we apply this to the special case of exchange economies were all agents have directly additive utilities - essentially a complete markets finance model with agents having von Neumann-Morgenstern utility functions. We show that the structural properties of demand near an equilibrium price depend on variations in the coefficient of relative risk aversion.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 1999-W15.
Date of creation: 01 Jan 1999
Date of revision:
general equilibrium; demand; indirect utility; stability; risk aversion;
Other versions of this item:
- John K.-H. Quah, 2000. "The Weak Axiom and Comparative Statics," Econometric Society World Congress 2000 Contributed Papers 0437, Econometric Society.
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- John K.-H. Quah, 1997. "The Law of Demand when Income Is Price Dependent," Econometrica, Econometric Society, vol. 65(6), pages 1421-1442, November.
- Muellbauer, John, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Wiley Blackwell, vol. 42(4), pages 525-43, October.
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- Polterovich, Victor & Mityushin, Leonid, 1978. "Criteria for Monotonicity of Demand Functions," MPRA Paper 20097, University Library of Munich, Germany.
- John K.H. Quah, 2003.
"The Law of Demand and Risk Aversion,"
Econometric Society, vol. 71(2), pages 713-721, March.
- Quah, John K. -H., 2003. "Market demand and comparative statics when goods are normal," Journal of Mathematical Economics, Elsevier, vol. 39(3-4), pages 317-333, June.
- John Quah, 2001.
"Comparative Statics of the Weak Axiom,"
Economics Series Working Papers
2001-W03, University of Oxford, Department of Economics.
- Nachbar, John H., 2004. "General equilibrium comparative statics: discrete shocks in production economies," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 153-163, February.
- Michael Jerison, 2001. "Demand Dispersion, Metonymy and Ideal Panel Data," Discussion Papers 01-11, University at Albany, SUNY, Department of Economics.
- John K.-H. Quah, 2004.
"The existence of equilibrium when excess demand obeys the weak axiom,"
2004-W07, Economics Group, Nuffield College, University of Oxford.
- Quah, John K.-H., 2008. "The existence of equilibrium when excess demand obeys the weak axiom," Journal of Mathematical Economics, Elsevier, vol. 44(3-4), pages 337-343, February.
- John Quah, 2004. "The existence of equilibrium when excess demand obeys the weak axiom," Economics Series Working Papers 2004-W07, University of Oxford, Department of Economics.
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