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Getting to a Competitive Equilibrium

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  • Keisler, H Jerome

Abstract

A random price adjustment model is developed for an exchange economy which is decentralized in that the trades permitted to an agent and the resulting price changes depend only on the commodity vector currently held by that agent, and not on the whole economy. We obtain asymptotic results as the number of agents goes to infinity, subject to stability assumptions on the price paths. With probability arbitrarily close to one the price path in our model will approximate the price path of the corresponding tatonnement process on a rapid time scale, and will then remain close to a limit price. Moreover, the economy will approach a competitive equilibrium, and the process will be feasible in the sense that the market maker's inventory is approximately constant over time. Copyright 1996 by The Econometric Society.

Suggested Citation

  • Keisler, H Jerome, 1996. "Getting to a Competitive Equilibrium," Econometrica, Econometric Society, vol. 64(1), pages 29-49, January.
    • Handle: RePEc:ecm:emetrp:v:64:y:1996:i:1:p:29-49
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    Cited by:

    1. Frederik Herzberg, 2013. "First steps towards an equilibrium theory for Lévy financial markets," Annals of Finance, Springer, vol. 9(3), pages 543-572, August.
    2. Peter J. Hammond, 2017. "Designing a strategyproof spot market mechanism with many traders: twenty-two steps to Walrasian equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(1), pages 1-50, January.
    3. Herings, P. Jean-Jacques & van der Laan, Gerard & Venniker, Richard, 1996. "The Transition from a Drèze Equilibrium to a Walrasian Equilibrium," LIDAM Discussion Papers IRES 1996013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    4. Eric Kemp-Benedict, 2012. "Price and Quantity Trajectories: Second-order Dynamics," Papers 1204.3156, arXiv.org.
    5. Goeree, Jacob K. & Lindsay, Luke, 2016. "Market design and the stability of general equilibrium," Journal of Economic Theory, Elsevier, vol. 165(C), pages 37-68.
    6. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, August.
    7. Herzberg, Frederik, 2011. "On the foundations of Lévy finance. Equilibrium for a single-agent financial market with jumps," Center for Mathematical Economics Working Papers 406, Center for Mathematical Economics, Bielefeld University.
    8. Ermoliev, Yu. & Keyzer, M. A. & Norkin, V., 2000. "Global convergence of the stochastic tatonnement process," Journal of Mathematical Economics, Elsevier, vol. 34(2), pages 173-190, October.
    9. Anderson, Robert M. & Raimondo, Roberto C., 2007. "Equilibrium in Continuous-Time Financial Markets: Endogenously Dynamically Complete Markets," Department of Economics, Working Paper Series qt0zq6v5gd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    10. Eric Smith & Duncan Foley & Benjamin Good, 2013. "Unhedgeable shocks and statistical economic equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(1), pages 187-235, January.
    11. J. Deride & A. Jofr'e & R. T. Rockafellar, 2023. "Reaching an equilibrium of prices and holdings of goods through direct buying and selling," Papers 2305.17577, arXiv.org.
    12. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

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