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On the probability of the competitive equilibrium being globally stable: The C.E.S. example

Hirota, Masayoshi (2004) On the probability of the competitive equilibrium being globally stable: The C.E.S. example. Social Science Working Paper, 1129R. California Institute of Technology , Pasadena, CA. (Unpublished)

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This paper extends an analysis proposed by Hirota (1981) to a class of economies with C.E.S. utility functions that include Scarf (1960)'s second example as a special case and shows by the use of numerical methods that (i) a Walrasian price adjustment mechanism converges to an equilibrium with very high probability and (ii) the weak axiom in revealed preference for market excess demands is satisfied with high probability, but the gross substitutability is rarely satisfied. Also, this paper suggests a possible interpretation of a Walrasian price adjustment that is based on the observations of experiments done by Anderson, Plott, Shimomura and Granat (2000).

Item Type:Report or Paper (Working Paper)
Additional Information:Revised version. Originally dated to September 20, 2003. I would like to thank Peter Bossaerts, Charles Plott, and other faculties at Caltech for a number of stimulating discussions. In particular, I am grateful to Charles Plott for his suggestions in this version.
Group:Social Science Working Papers
Subject Keywords:probability, numerical method, global stability, Walrasian price adjustment, weak axiom, gross substitutes
Series Name:Social Science Working Paper
Issue or Number:1129R
Record Number:CaltechAUTHORS:20170802-170857684
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79802
Deposited By: Jacquelyn Bussone
Deposited On:07 Aug 2017 18:15
Last Modified:03 Oct 2019 18:24

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