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Walrasian equilibrium in an exchange economy with indivisibilities

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  • Ma, Jinpeng
  • Nie, Fusheng

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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  • Ma, Jinpeng & Nie, Fusheng, 2003. "Walrasian equilibrium in an exchange economy with indivisibilities," Mathematical Social Sciences, Elsevier, vol. 46(2), pages 159-192, October.
    • Handle: RePEc:eee:matsoc:v:46:y:2003:i:2:p:159-192
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    Cited by:

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    2. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, August.
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    5. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

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