Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79181
Title:

# Walrasian equilibrium in an exchange economy with indivisibilities

Authors:
Ma, Jinpeng
Nie, Fusheng
Year of Publication:
2002
Series/Report no.:
Working Papers, Department of Economics, Rutgers, The State University of New Jersey 2002,07
Abstract:
This paper studies an exchange economy with indivisibilities. Our main goal is to see if a price system can function well in an economy (e.g., an economy with complementary preferences) that does not have a Walrasian equilibrium. We study the price adjustment processes governed by the Euler iterative scheme. We show that in an economy that has a Walrasian equilibrium, our price adjustment processes have a common uniform limit that is {\em unique} and converges to a Walrasian equilibrium price vector in finite time. Surprisingly, in an economy that does not have a Walrasian equilibrium, our price adjustment processes also have a common uniform limit that is {\em unique} and converges to a market equilibrium price vector in finite time. Moreover, market equilibrium prices coincide with Walrasian equilibrium ones in an economy that has a Walrasian equilibrium. Further, there are no prices other than the Walrasian or market equilibrium ones that have such a property of global stability.
Subjects:
Walrasian
JEL:
D71
Document Type:
Working Paper
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