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Past expectations as a determinant of equilibrium prices - hysteresis in a simple economy

Author

Listed:
  • Sofia Castro

    (Faculdade de Economia, Universidade do Porto)

  • João Correia-da-Silva

    (Faculdade de Economia, Universidade do Porto)

Abstract

We give an illustration of hysteresis (path-dependence) in a simple economy. In the presence of multiple possible equilibrium prices, we find that past expectations determine present prices. This phenomenon of path-dependence is robust under perturbations of the economy.

Suggested Citation

  • Sofia Castro & João Correia-da-Silva, 2005. "Past expectations as a determinant of equilibrium prices - hysteresis in a simple economy," FEP Working Papers 185, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:185
    as

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    References listed on IDEAS

    as
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    5. Donald Katzner, 1999. "Hysteresis and the Modeling of Economic Phenomena," Review of Political Economy, Taylor & Francis Journals, vol. 11(2), pages 171-181.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Hysteresis; Path-dependence; Tatônnement; Equilibrium selection;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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