Getting to a Competitive Equilibrium
A random price adjustment model is developed for an exchange economy which is decentralized in that the trades permitted to an agent and the resulting price changes depend only on the commodity vector currently held by that agent, and not on the whole economy. We obtain asymptotic results as the number of agents goes to infinity, subject to stability assumptions on the price paths. With probability arbitrarily close to one the price path in our model will approximate the price path of the corresponding tatonnement process on a rapid time scale, and will then remain close to a limit price. Moreover, the economy will approach a competitive equilibrium, and the process will be feasible in the sense that the market maker's inventory is approximately constant over time. Copyright 1996 by The Econometric Society.
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Volume (Year): 64 (1996)
Issue (Month): 1 (January)
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