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

Sofia Castro () and Joao Correia-da-Silva
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Sofia Castro: Faculdade de Economia, Universidade do Porto

FEP Working Papers from Universidade do Porto, Faculdade de Economia 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.

Keywords: Hysteresis; Path-dependence; Tatônnement; Equilibrium selection (search for similar items in EconPapers)
JEL-codes: C62 D50 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2005-07
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