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The limit-price exchange process

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  • Gaël Giraud

    (CERMSEM)

Abstract

We define a continuous-time trading process for Arrow-Debreu exchange economies such that (1) At each time, myopic traders play a (weakly) dominant strategy in Mertens' (2003) limit price strategic market game; (2) existence of continuous trade curves holds under weak conditions and in particular even if there is no static Walras equilibrium; (3) every trade curve converges to some Pareto optimal point; (4) for a generic choice of utilities and initial endowments, there is a piecewise unique trade curve, which is smooth and depends continuously upon initial conditions; (5) in the 2 x 2 case, for every interior starting point, the vector field corresponding to our dynamics is real-analytic; moreover, trade and price curves can be fully characterized and numerically simulated

Suggested Citation

  • Gaël Giraud, 2004. "The limit-price exchange process," Cahiers de la Maison des Sciences Economiques b04118, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:mse:wpsorb:b04118
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    Cited by:

    1. Gaël Giraud, 2010. "Financial crashes versus liquidity trap : the dilemma of monetary policy," Post-Print halshs-00657047, HAL.
    2. Gaël Giraud & Céline Rochon, 2010. "Transition to Equilibrium in International Trades," Documents de travail du Centre d'Economie de la Sorbonne 10012, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    3. Gaël Giraud & Dimitrios Tsomocos, 2010. "Nominal uniqueness and money non-neutrality in the limit-price exchange process," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 45(1), pages 303-348, October.
    4. Gaël Giraud, 2004. "Walrasian non-tâtonnement with incomplete and imperfect markets," Cahiers de la Maison des Sciences Economiques b04119, Université Panthéon-Sorbonne (Paris 1).
    5. Gaël Giraud, 2007. "Walrasian Non-tatonnement with Incomplete and Imperfectly Competitive Markets," Post-Print halshs-00155717, HAL.

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    More about this item

    Keywords

    Non-tâtonnement; price-quantity dynamics; temporary equilibrium; limit-price mechanism; myopia;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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