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Comparative Statics of the Weak Axiom

  • John Quah

    ()

    (St Hugh's College, Oxford)

This paper examines the comparative statics of Walrasian economies with excess demand functions which obey the weak axiom. We show that in these economies there is a precise sense in which goods that are in excess supply (demand) after some perturbation will experience a fall (rise) in its price. We apply this to an exchange economy with additive utility functions, which can be interpreted as a financial economy with von Neumann-Morgenstern utility functions. We show that when the subjective probabilities which agents attribute to a particular state falls, so will the price of consumption in that state. Another interesting issue is the impact of changes to the endowment on the equilibrium price. We develop conditions under which, for an exchange economy, this equilibrium map - from endowment to equilibrium price - will obey the weak axiom and another stronger, monotonicity property.

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File URL: http://www.nuff.ox.ac.uk/Economics/papers/2001/w3/cswa.pdf
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Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2001-W3.

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Length: 21pages
Date of creation: 01 Mar 2001
Date of revision:
Handle: RePEc:nuf:econwp:0103
Contact details of provider: Web page: http://www.nuff.ox.ac.uk/economics/

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  1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
  2. Polterovich, Victor & Mityushin, Leonid, 1978. "Criteria for Monotonicity of Demand Functions," MPRA Paper 20097, University Library of Munich, Germany.
  3. Quah, J-K-H, 1996. "The Monotonicity of Individual and Market Demand," Economics Papers 127, Economics Group, Nuffield College, University of Oxford.
  4. John Quah, 1999. "The Weak Axiom and Comparative Statics," Economics Series Working Papers 1999-W15, University of Oxford, Department of Economics.
  5. Shafer, Wayne & Sonnenschein, Hugo, 1993. "Market demand and excess demand functions," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 14, pages 671-693 Elsevier.
  6. Jerison, Michael, 1999. "Dispersed excess demands, the weak axiom and uniqueness of equilibrium," Journal of Mathematical Economics, Elsevier, vol. 31(1), pages 15-48, February.
  7. John K.-H. Quah, 1997. "The Law of Demand when Income Is Price Dependent," Econometrica, Econometric Society, vol. 65(6), pages 1421-1442, November.
  8. John H. Nachbar, 2002. "General Equilibrium Comparative Statics," Econometrica, Econometric Society, vol. 70(5), pages 2065-2074, September.
  9. Hildenbrand, Werner, 1983. "On the "Law of Demand."," Econometrica, Econometric Society, vol. 51(4), pages 997-1019, July.
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