Stability of the Market Economy in the Presence of Diverse Economic Agents
The stability of market economy is defined and stability conditions deduced which do not appear to restrict preferences in any significant manner. This assumes importance when considering economies where diversity among agents is known to exist. It is shown that if a condition on the rank of the Jacobian matrix of the excess demand functions at equilibria is satisfied then equilibria will be locally asymptotically stable. When this condition is not met, it is shown how redistributing resources may lead to stable competitive equilibrium. It is also shown how instead of imposing credible penalties, which may cause significant incentive problems, redistributing resources may serve to provide the correct incentives to agents who otherwise might have contributed to market failure.
|Date of creation:||01 Mar 2010|
|Date of revision:|
|Contact details of provider:|| Postal: 6th-13th floors, Shinjuku Maynds Tower, 2-1-1 Yoyogi, Shibuya-ku, Tokyo 151-8558|
Web page: http://jica-ri.jica.go.jp/
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.:
- Venkatesh Bala, 1997. "A pitchfork bifurcation in the tatonnement process," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(3), pages 521-530.
- Hirota, Masayoshi, 1985. "Global stability in a class of markets with three commodities and three consumers," Journal of Economic Theory, Elsevier, vol. 36(1), pages 186-192, June.
- Anjan Mukherji, 1973. "On the Sensitivity of Stability Results to the Choice of the Numeraire," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 427-433.
- Hirota, Masayoshi & Hsu, Ming & Plott, Chrales R. & Rogers, Brian W., 2005. "Divergence, closed cycles and convergence in scarf environments: Experiments in the dynamics of general equilibrium systems," Working Papers 1239, California Institute of Technology, Division of the Humanities and Social Sciences.
- Anjan Mukherji, 2008. "Stability of a competitive economy: A reconsideration," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(2), pages 317-336.
- Hildenbrand, Werner, 1983. "On the "Law of Demand."," Econometrica, Econometric Society, vol. 51(4), pages 997-1019, July.
- Hirota, Masayoshi, 1981. "On the Stability of Competitive Equilibrium and the Patterns of Initial Holdings: An Example," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 461-67, June.
- Anjan Mukherji, 2003. "Global Stability Conditions on the Plane," ISER Discussion Paper 0589, Institute of Social and Economic Research, Osaka University.
- Herbert E. Scarf, 1959. "Some Examples of Global Instability of the Competitive Equilibrium," Cowles Foundation Discussion Papers 79, Cowles Foundation for Research in Economics, Yale University.
- Anderson, Christopher M. & Granat, Sander & Plott, Charles R. & Shimomura, Ken-Ichi, 2000.
"Global Instability in Experimental General Equilibrium: The Scarf Example,"
1086, California Institute of Technology, Division of the Humanities and Social Sciences.
- Anderson, Christopher M. & Plott, Charles R. & Shimomura, K.-I.Ken-Ichi & Granat, Sander, 2004. "Global instability in experimental general equilibrium: the Scarf example," Journal of Economic Theory, Elsevier, vol. 115(2), pages 209-249, April.
When requesting a correction, please mention this item's handle: RePEc:jic:wpaper:8. 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: (Japan International Cooperation Agency Library)
If references are entirely missing, you can add them using this form.