Intertemporal competitive equilibrium: a reappraisal of a basic source of instability
This paper resumes a source of instability of intertemporal equilibrium which was anticipated by Garegnani (2003) and criticized by Schefold (2004). The author points out that a non orthodox tÃ¢tonnement pricing must be accepted if the theory has to be consistent with the Jevonsâ€™s law of unique price. Such tÃ¢tonnement prescribes that the rule for adjusting the relative prices of commodities available at different times is different from the rule applied to the relative prices of contemporary commodities. The working of such a mechanism can be a fundamental source of instability of the intertemporal equilibria. This result seems to be a challenge for the stability of general equilibrium also in the context of more realistic nontÃ¢tonnement disequilibrium processes.
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