Jinpeng Ma () (Economics, Rutgers University, Camden, NJ 08102) Fusheng Nie () (Philadelphia Stock Exchange)
Abstract
This paper studies an exchange economy with indivisibilities. Our main goal is to see if a price system can function well in an economy (e.g., an economy with complementary preferences) that does not have a Walrasian equilibrium. We study the price adjustment processes governed by the Euler iterative scheme. We show that in an economy that has a Walrasian equilibrium, our price adjustment processes have a common uniform limit that is unique and converges to a Walrasian equilibrium price vector in finite time. Surprisingly, in an economy that does not have a Walrasian equilibrium, our price adjustment processes also have a common uniform limit that is unique and converges to a market equilibrium price vector in finite time. Moreover, market equilibrium prices coincide with Walrasian equilibrium ones in an economy that has a Walrasian equilibrium. Further, there are no prices other than the Walrasian or market equilibrium ones that have such a property of global stability.
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Publisher Info
Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number
200207.
References listed on IDEAS 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.:
Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986.
"Multi-Item Auctions,"
Journal of Political Economy,
University of Chicago Press, vol. 94(4), pages 863-72, August.
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