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Balanced Growth in Decentralized Economies

In: Balanced and Cyclical Growth in Models of Decentralized Economy

Author

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  • Alexander P. Abramov

    (Russian Academy of Sciences)

Abstract

In this chapter, we consider decision making algorithms that ensure balanced growth in decentralized economic systems. We assume that the economic system under consideration consists of a finite number monoproduct sectors whose outputs in any time period are defined by Leontief production functions. We show that there exists a dynamic system of prices where all the sectors ensure balanced growth for the whole economic system by aiming to maximize their profit. Prices have the following characteristic property: They depend on the volume of production so that the price of a product goes down as its output grows. The dependencies under consideration ensure that profit is a unimodal function of the volume of production in the next technological cycle. This ensures that each of the sectors selects its production plans in a unique way. We also consider the case where prices are set individually for each buyer depending on the order size. This is usual for wholesale trade, where the price of a product goes down as the order size grows.

Suggested Citation

  • Alexander P. Abramov, 2014. "Balanced Growth in Decentralized Economies," Lecture Notes in Economics and Mathematical Systems, in: Balanced and Cyclical Growth in Models of Decentralized Economy, edition 127, chapter 0, pages 7-40, Springer.
    • Handle: RePEc:spr:lnechp:978-3-319-07917-2_2
    DOI: 10.1007/978-3-319-07917-2_2
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