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Statistical approach to partial equilibrium analysis

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  • Wang, Yougui
  • Stanley, H.E.

Abstract

A statistical approach to market equilibrium and efficiency analysis is proposed in this paper. One factor that governs the exchange decisions of traders in a market, named willingness price, is highlighted and constitutes the whole theory. The supply and demand functions are formulated as the distributions of corresponding willing exchange over the willingness price. The laws of supply and demand can be derived directly from these distributions. The characteristics of excess demand function are analyzed and the necessary conditions for the existence and uniqueness of equilibrium point of the market are specified. The rationing rates of buyers and sellers are introduced to describe the ratio of realized exchange to willing exchange, and their dependence on the market price is studied in the cases of shortage and surplus. The realized market surplus, which is the criterion of market efficiency, can be written as a function of the distributions of willing exchange and the rationing rates. With this approach we can strictly prove that a market is efficient in the state of equilibrium.

Suggested Citation

  • Wang, Yougui & Stanley, H.E., 2009. "Statistical approach to partial equilibrium analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(7), pages 1173-1180.
  • Handle: RePEc:eee:phsmap:v:388:y:2009:i:7:p:1173-1180 DOI: 10.1016/j.physa.2008.12.007
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    References listed on IDEAS

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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. Guseo, Renato & Guidolin, Mariangela, 2010. "Cellular Automata with network incubation in information technology diffusion," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(12), pages 2422-2433.

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