A globally and universally stable price adjustment process

Conference · Sat Dec 31 04:00:00 EST 1994

OSTI ID:36126

Herings, J J

Starting with Walras, economists have been interested in adjustment processes that find for a given economy and an arbitrarily specified starting price vector a Walrasian equilibrium. Mathematically, the problem is equivalent to finding a fixed point of a function under the conditions of the Brouwer Fixed Point Theorem when starting with an arbitrary initial point. In the paper it is proved that an adjustment process, originally proposed by Van der Laan and Talman, converges for almost every economy, given any starting price vector, under standard assumptions. It is possible to obtain additional results in case the excess demand function satisfies the condition of gross substitutability. In this special case it can be shown that the qualitative behaviour of the process is similar to the one of the well-known Walrasian tatonnement process. Since there is a close relationship between the existence of always converging adjustment processes and the Brouwer Fixed Point Theorem it is not a surprise that there is a relation between adjustment processes and simplicial pivoting algorithms to compute fixed points. The adjustment process considered in this paper is related to a variable dimension fixed point algorithm of Doup, Van der Laan, and Talman. The path generated by the adjustment process can be followed arbitrarily close by their algorithm. Therefore the paper also yields a contribution to the understanding of the limit behaviour of simplicial pivoting algorithms.

• OSTI ID: 36126
• Report Number(s): CONF-9408161--
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
99 GENERAL AND MISCELLANEOUS
COMPUTERIZED SIMULATION
ECONOMIC ANALYSIS
ENERGY DEMAND
MATRICES
NUMERICAL SOLUTION
SUPPLY AND DEMAND