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Price adjustment models in a production economy

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  • C. Weddepohl

Abstract

In a simple economy (a produced good and labour), a discrete‐time tatonnement processconverges only at low rates of adjustment and shows cycles and chaotic behaviour at higherrates, where prices in turn go up and down. The same holds for a sequence of fixed priceequilibria, with price adjustment directed by effective excess demands. We look at the casewhere two markets open consecutively, the labour market first. Labour demand, productionand goods supply are determined by expectations, depending on the demand of the previousperiod. This again leads to cycles and chaos, but also to long periods of ascent and decline. Copyright Kluwer Academic Publishers 1999

Suggested Citation

  • C. Weddepohl, 1999. "Price adjustment models in a production economy," Annals of Operations Research, Springer, vol. 89(0), pages 149-164, January.
    • Handle: RePEc:spr:annopr:v:89:y:1999:i:0:p:149-164:10.1023/a:1018967405289
    DOI: 10.1023/A:1018967405289
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    Cited by:

    1. van der Laan, G. & Talman, A.J.J., 2002. "Dynamic Adjustment of Supply Constrained Disequilibria to Walrasian Equilibrium," Other publications TiSEM 8c5d443d-92c8-4e82-bcef-3, Tilburg University, School of Economics and Management.
    2. Luca Colombo & G. Weinrich & F. Bignami, 2000. "A Dynamic Non-Tatonnement Macroeconomic Model With Stochastic Rationing," Computing in Economics and Finance 2000 198, Society for Computational Economics.

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