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|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.aspEmail:
More information through EDIRC
References listed on IDEAS
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.:
- Muellbauer, John, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Wiley Blackwell, vol. 42(4), pages 525-43, October.
- 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.
- 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.
- Kannai, Yakar, 1977. "Concavifiability and constructions of concave utility functions," Journal of Mathematical Economics, Elsevier, vol. 4(1), pages 1-56, March.
- Polterovich, Victor & Mityushin, Leonid, 1978. "Criteria for Monotonicity of Demand Functions," MPRA Paper 20097, University Library of Munich, Germany.
- Mantel, Rolf R., 1976. "Homothetic preferences and community excess demand functions," Journal of Economic Theory, Elsevier, vol. 12(2), pages 197-201, April.
When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:0437. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.