Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/181627
Authors: 
Glötzl, Erhard
Glötzl, Florentin
Richters, Oliver
Year of Publication: 
2018
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2018: Digitale Wirtschaft - Session: Theory - Concepts G04-V1
Abstract: 
Economic equilibrium models have been inspired by analogies to stationary states in classical mechanics. To extend these mathematical analogies from constrained optimization to constrained dynamics, we formalize economic (constraint) forces and economic power in analogy to physical (constraint) forces and the reciprocal value of mass. Agents employ forces to change economic variables according to their desire and their power to assert their interest. These ex-ante forces are completed by constraint forces from unanticipated system constraints to yield the ex-post dynamics. The differential-algebraic equation framework seeks to overcome some restrictions inherent to the optimization approach and to provide an out-of-equilibrium foundation for general equilibrium models. We transform a static Edgeworth box exchange model into a dynamic model with procedural rationality (gradient climbing) and slow price adaptation, and discuss advantages, caveats, and possible extensions to the modeling framework.
Subjects: 
Disequilibrium Dynamics
Lagrangian Mechanics
Behavioral Microeconomics
Constrained Dynamics
Edgeworth Box
Tatonnement
JEL: 
A12
B00
C62
D50
Document Type: 
Conference Paper

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