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Normal Approximation of the Disrtibution of the Equilibrium Price in Markets with Random Demand and Supply

Author

Listed:
  • Martin Smid

    (Institute of Information Theory & Automation of the Academy of Sciences of the Czech Republic)

Abstract

In the paper, the asymptotic distribution of the equilibrium price in markets with the random demand and supply is described. Two special cases - the one with smooth demand and supply curves and the one with jump demand and supply curves - are studied. It is found that in both the cases the fluctuations of the price vanish at the rate O(n^{-1/2}) as the number of the agents n tends to infinity. Finally, a normal approximation of the distribution of the equilibrium price is suggested.

Suggested Citation

  • Martin Smid, 2004. "Normal Approximation of the Disrtibution of the Equilibrium Price in Markets with Random Demand and Supply," GE, Growth, Math methods 0411001, EconWPA.
  • Handle: RePEc:wpa:wuwpge:0411001
    Note: Type of Document - pdf; pages: 13
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    More about this item

    Keywords

    equilibrium price; random demand; random supply; asymptotic distribution; normal approximation;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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