Emergence of price-taking Behavior

Sjur Didrik Flåm ()
Additional contact information
Sjur Didrik Flåm: University of Bergen

Economic Theory, 2020, vol. 70, issue 3, No 9, 847-870

Abstract: Abstract Price-taking behavior is the bedrock of much market theory. How might such behavior emerge? Addressing that old but still intriguing question, this paper uses a money commodity to denominate all rates of exchange and substitution. Out of equilibrium, some rates differ between agents, thereby driving trade. The simplest form of trade is bilateral; it needs no broker, center or supervisor. Yet, under broad conditions, that elementary institution can take the economy to competitive equilibrium. Proving convergence, this paper invokes minimal hypotheses as to agents’ behaviors, competences and deals. Moreover, agents may make boundary choices, appreciate relatively few commodities, choose within general domains and deploy non-smooth preferences. Convex analysis provides the chief tool kit.

Keywords: Money commodity; Bilateral exchange; Market equilibrium (search for similar items in EconPapers)
JEL-codes: C63 D03 D51 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s00199-019-01232-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:70:y:2020:i:3:d:10.1007_s00199-019-01232-5

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-019-01232-5

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().