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Multiple Equilibria in Exchange Economies with Homothetic, Nearly Identical Preferences


  • Gjerstad, S.


For agents with identical homothetic preferences (but possibly different endowments), aggregate excess demand can be derived from maximization of a utility function of a representative agent whose endowment is the sum of the individual's endowments. Such an economy has a unique equilibrium. In this paper, a metric p is defined on the set P of preference relations representable by CES utility functions. It is then shown that there are agentswhose preference relations in P are arbitrarily close to one another in t he metric p, and there are endowments for these agents, such that the resulting exchange economy has a multiple Walrasian equilibria.

Suggested Citation

  • Gjerstad, S., 1996. "Multiple Equilibria in Exchange Economies with Homothetic, Nearly Identical Preferences," Papers 288, Minnesota - Center for Economic Research.
  • Handle: RePEc:fth:minner:288

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    References listed on IDEAS

    1. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-955, December.
    2. Hurwicz, Leonid & Radner, Roy & Reiter, Stanley, 1975. "A Stochastic Decentralized Resource Allocation Process: Part I," Econometrica, Econometric Society, vol. 43(2), pages 187-221, March.
    3. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 322-322.
    4. Gjerstad, Steven & Dickhaut, John, 1998. "Price Formation in Double Auctions," Games and Economic Behavior, Elsevier, vol. 22(1), pages 1-29, January.
    5. Cason, Timothy N. & Friedman, Daniel, 1996. "Price formation in double auction markets," Journal of Economic Dynamics and Control, Elsevier, vol. 20(8), pages 1307-1337, August.
    6. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 119-137, February.
    7. Jon Ketcham & Vernon L. Smith & Arlington W. Williams, 1984. "A Comparison of Posted-Offer and Double-Auction Pricing Institutions," Review of Economic Studies, Oxford University Press, vol. 51(4), pages 595-614.
    8. Plott, Charles R, 1982. "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1485-1527, December.
    9. Easley, David & Ledyard, John., "undated". "Theories of Price Formation and Exchange in Double Oral Auctions," Working Papers 611, California Institute of Technology, Division of the Humanities and Social Sciences.
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    Cited by:

    1. Kubler, Felix & Schmedders, Karl, 2010. "Competitive equilibria in semi-algebraic economies," Journal of Economic Theory, Elsevier, vol. 145(1), pages 301-330, January.
    2. repec:eee:dyncon:v:84:y:2017:i:c:p:77-90 is not listed on IDEAS
    3. Toda, Alexis Akira, 2017. "Huggett economies with multiple stationary equilibria," Journal of Economic Dynamics and Control, Elsevier, vol. 84(C), pages 77-90.
    4. Bodenstein, Martin, 2010. "Trade elasticity of substitution and equilibrium dynamics," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1033-1059, May.
    5. Bergstrom Theodore C & Shimomura Ken-Ichi & Yamato Takehiko, 2009. "Simple Economies with Multiple Equilibria," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-31, December.
    6. Bodenstein, Martin, 2011. "Closing large open economy models," Journal of International Economics, Elsevier, vol. 84(2), pages 160-177, July.
    7. Li, Xiaoliang & Wang, Dongming, 2014. "Computing equilibria of semi-algebraic economies using triangular decomposition and real solution classification," Journal of Mathematical Economics, Elsevier, vol. 54(C), pages 48-58.

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    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies


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