The Weak Axiom and Comparative Statics
This paper examines conditions which guarantee that the excess demand function of an exchange economy will satisfy the weak axiom in an open neighborhood of a given equilibrium price. This property ensures that the equilibrium is locally stable with respect to Walras' tatonnement. A related issue is the possibility of local comparative statics; in particular, the paper examines conditions which guarantee that when an economy's endowment is perturbed, the equilibrium price will move in a direction opposite to that of the perturbation. A distinguishing feature of this paper's approach is the heavy use of the indirect utility function, though we also provide results that allow for the translation of conditions imposed on indirect utility functions to conditions imposed on direct utility functions. Indeed we apply this to the special case of exchange economies where all agents have directly additive utilities - essentially a complete markets finance model with agents having von Neumann-Morgenstern utility functions. We show that the structural properties of demand near an equilibrium price depend on variations in the coefficient of relative risk aversion.
|Date of creation:||01 Aug 2000|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
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.:
- Kannai, Yakar, 1977. "Concavifiability and constructions of concave utility functions," Journal of Mathematical Economics, Elsevier, vol. 4(1), pages 1-56, March.
- Mas-Colell,Andreu, 1990.
"The Theory of General Economic Equilibrium,"
Cambridge University Press, number 9780521388702.
- Mas-Colell,Andreu, 1985. "The Theory of General Economic Equilibrium," Cambridge Books, Cambridge University Press, number 9780521265140, February.
- Mantel, Rolf R., 1976. "Homothetic preferences and community excess demand functions," Journal of Economic Theory, Elsevier, vol. 12(2), pages 197-201, April.
- Hildenbrand, Werner, 1983. "On the "Law of Demand."," Econometrica, Econometric Society, vol. 51(4), pages 997-1019, July.
- John K.-H. Quah, 1997. "The Law of Demand when Income Is Price Dependent," Econometrica, Econometric Society, vol. 65(6), pages 1421-1442, November.
- Polterovich, Victor & Mityushin, Leonid, 1978. "Criteria for Monotonicity of Demand Functions," MPRA Paper 20097, University Library of Munich, Germany.
- John Muellbauer, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 525-543.
- Sonnenschein, Hugo, 1973. "Do Walras' identity and continuity characterize the class of community excess demand functions?," Journal of Economic Theory, Elsevier, vol. 6(4), pages 345-354, August. Full references (including those not matched with items on IDEAS)