The effect of Kapitza pendulum and price equilibrium

Janusz A. Hołyst and Winicjusz Wojciechowski

Physica A: Statistical Mechanics and its Applications, 2003, vol. 324, issue 1, 388-395

Abstract: Periodical perturbations of market dynamics are analyzed using a method of time scales separation similar to the approach that is usually applied for the analysis of Kapitza pendulum. It is shown that if the perturbations are fast enough then the market oscillates around a new equilibrium price that is shifted comparing to the equilibrium price of the unperturbed system. The shift is proportional to the difference D″(p)−S″(p) between the curvature of demand and supply functions. It follows that periodical perturbations will increase the equilibrium price of a typical market. Numerical simulations are in a good agreement with analytical results.

Keywords: Fast oscillations; Time scale separations; Market dynamics (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:324:y:2003:i:1:p:388-395

DOI: 10.1016/S0378-4371(03)00033-5

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