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Walrasian Equilibrium in an Exchange Economy with Indivisibilities

Author

Listed:
  • Jinpeng Ma

    () (Economics, Rutgers University, Camden, NJ 08102)

  • Fusheng Nie

    () (Philadelphia Stock Exchange)

Abstract

This paper studies an exchange economy with indivisibilities. Our main goal is to see if a price system can function well in an economy (e.g., an economy with complementary preferences) that does not have a Walrasian equilibrium. We study the price adjustment processes governed by the Euler iterative scheme. We show that in an economy that has a Walrasian equilibrium, our price adjustment processes have a common uniform limit that is unique and converges to a Walrasian equilibrium price vector in finite time. Surprisingly, in an economy that does not have a Walrasian equilibrium, our price adjustment processes also have a common uniform limit that is unique and converges to a market equilibrium price vector in finite time. Moreover, market equilibrium prices coincide with Walrasian equilibrium ones in an economy that has a Walrasian equilibrium. Further, there are no prices other than the Walrasian or market equilibrium ones that have such a property of global stability.

Suggested Citation

  • Jinpeng Ma & Fusheng Nie, 2002. "Walrasian Equilibrium in an Exchange Economy with Indivisibilities," Departmental Working Papers 200207, Rutgers University, Department of Economics.
  • Handle: RePEc:rut:rutres:200207
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    References listed on IDEAS

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    Keywords

    Walrasian;

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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