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The limit-price exchange process

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We define a continuous-time trading process for Arrow-Debreu exchange economies such that (1) At each time, myopic traders play a (weakly) dominant strategy in Mertens' (2003) limit price strategic market game ; (2) existence of continuous trade curves holds under weak conditions and in particular even if there is no static Walras equilibrium ; (3) every trade curve converges to some Pareto optimal point ; (4) for a generic choice of utilities and initial endowments, there is a piecewise unique trade curve, which is smooth and depends continuously upon initial conditions ; (5) in the 2 x 2 case, for every interior starting point, the vector field corresponding to our dynamics is real-analytic ; moreover, trade and price curves can be fully characterized and numerically simulated.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2004/B04118.pdf
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Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number b04118.

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Length: 54 pages
Date of creation: Sep 2004
Handle: RePEc:mse:wpsorb:b04118
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