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Supply and demand law under limited information

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  • Zhang, Yi-Cheng

Abstract

We present a model for the supply-demand law with quality and limited information capability. We postulate that imperfect information permeates in almost all economic transactions to varying degrees. Through a simple model we outline a research agenda that re-examines many standard issues in economics. Our analysis shows that whereas imperfect information can be improved, it leads to new uncertainties so that the perfect information limit can never be reached. As a corollary neoclassical perfect equilibrium can never be attained.

Suggested Citation

  • Zhang, Yi-Cheng, 2005. "Supply and demand law under limited information," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 350(2), pages 500-532.
  • Handle: RePEc:eee:phsmap:v:350:y:2005:i:2:p:500-532
    DOI: 10.1016/j.physa.2004.11.057
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    References listed on IDEAS

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    1. Capocci, Andrea & Zhang, Yi-Cheng, 2001. "Market ecology of active and passive investors," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 298(3), pages 488-498.
    2. Andrea Capocci & Yi-Cheng Zhang, 2001. "Market ecology of active and passive investors," Papers cond-mat/0104337, arXiv.org.
    3. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    4. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
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    Cited by:

    1. Tilles, Paulo F.C. & Ferreira, Fernando F. & Francisco, Gerson & Pereira, Carlos de B. & Sarti, Flavia M., 2011. "A Markovian model market—Akerlof’s lemons and the asymmetry of information," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(13), pages 2562-2570.
    2. Liao, Hao & Xiao, Rui & Chen, Duanbing & Medo, Matúš & Zhang, Yi-Cheng, 2014. "Firm competition in a probabilistic framework of consumer choice," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 400(C), pages 47-56.
    3. Medo, Matúš & Zhang, Yi-Cheng, 2008. "Market model with heterogeneous buyers," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(12), pages 2889-2908.

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