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Non-Trivial Equilibrium in an Economy With Stochastic Rationing

  • Seppo Honkapohja
  • Takatoshi Ito

Stochastic rationing when the market does not clear draws attention because both Dreze (1975) and Benassy (1975) quantity-constrained equilibria have some undesirable features. Gale (1978)gave the existence proof of trade under uncertainty. His stochastic rationing depends on all the individual effective demands. It is too vague to characterize a rationing mechanism. Moreover, his assumption to ensure a non-trivial equilibrium is economically not clear. In this paper we extend Green (1978) to characterizing the rationing scheme as the individual effective demand times the rationing number which is a function of the aggregate quantity signals. We also construct an economy with money and overlapping generations. We show the existence of the non-trivial equilibrium and provide an example of a non-Wairasian equilibrium at the Walrasian equilibrium prices.

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File URL: http://www.nber.org/papers/w0322.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0322.

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Date of creation: Feb 1979
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Handle: RePEc:nbr:nberwo:0322
Note: EFG
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  1. Bohm, Volker, 1978. "Disequilibrium dynamics in a simple macroeconomic model," Journal of Economic Theory, Elsevier, vol. 17(2), pages 179-199, April.
  2. Green, Jerry R & Majumdar, Mukul, 1975. "The Nature of Stochastic Equilibria," Econometrica, Econometric Society, vol. 43(4), pages 647-60, July.
  3. Fuchs, Gerard, 1977. "Formation of expectations : A model in temporary general equilibrium theory," Journal of Mathematical Economics, Elsevier, vol. 4(2), pages 167-187, August.
  4. Grandmont, Jean-Michel & Hildenbrand, Werner, 1974. "Stochastic processes of temporary equilibria," Journal of Mathematical Economics, Elsevier, vol. 1(3), pages 247-277, December.
  5. GRANDMONT, Jean-Michel & LAROQUE, Guy, . "Money in the pure consumption loan model," CORE Discussion Papers RP -152, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Benassy, Jean-Pascal, 1975. "Neo-Keynesian Disequilibrium Theory in a Monetary Economy," Review of Economic Studies, Wiley Blackwell, vol. 42(4), pages 503-23, October.
  7. Fuchs, Gerard & Laroque, Guy, 1976. "Dynamics of Temporary Equilibria and Expectations," Econometrica, Econometric Society, vol. 44(6), pages 1157-78, November.
  8. Grandmont, Jean-Michel, 1972. "Continuity properties of a von Neumann-Morgenstern utility," Journal of Economic Theory, Elsevier, vol. 4(1), pages 45-57, February.
  9. Heller, Walter Perrin & Starr, Ross M, 1979. "Unemployment Equilibrium with Myopic Complete Information," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 339-59, April.
  10. Fuchs, Gerard, 1976. "Asymptotic stability of stationary temporary equilibria and changes in expectations," Journal of Economic Theory, Elsevier, vol. 13(2), pages 201-216, October.
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