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On the instability of competitive equilibrium: a further example

Author

Listed:
  • Junichi Minagawa

    (Part-time Lecturer, Tokyo University of Foreign Studies)

Abstract

It is shown that a Walrasian price adjustment process fails to converge to an equilibrium in an exchange economy with three consumers and three commodities, where each consumer has a quasilinear utility function, desires only two commodities, and demands positive amounts of both commodities. The instability is due to weak substitution effects in addition to asymmetrical income effects.

Suggested Citation

  • Junichi Minagawa, 2012. "On the instability of competitive equilibrium: a further example," Economics Bulletin, AccessEcon, vol. 32(1), pages 80-85.
    • Handle: RePEc:ebl:ecbull:eb-11-00252
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I1-P9.pdf
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    References listed on IDEAS

    as
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    4. Hirota, Masayoshi, 1985. "Global stability in a class of markets with three commodities and three consumers," Journal of Economic Theory, Elsevier, vol. 36(1), pages 186-192, June.
    5. Anderson, Christopher M. & Plott, Charles R. & Shimomura, K.-I.Ken-Ichi & Granat, Sander, 2004. "Global instability in experimental general equilibrium: the Scarf example," Journal of Economic Theory, Elsevier, vol. 115(2), pages 209-249, April.
    6. Hirota, Masayoshi, 1981. "On the Stability of Competitive Equilibrium and the Patterns of Initial Holdings: An Example," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 461-467, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Exchange economy; Instability; Quasilinear utility;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium

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