The Invisible Hand of Laplace: the Role of Market Structure in Price Convergence and Oscillation

Yuval Rabani and Leonard J. Schulman

Papers from arXiv.org

Abstract: A fundamental question about a market is under what conditions, and then how rapidly, does price signaling cause price equilibration. Qualitatively, this ought to depend on how well-connected the market is. We address this question quantitatively for a certain class of Arrow-Debreu markets with continuous-time proportional t\^{a}tonnement dynamics. We show that the algebraic connectivity of the market determines the effectiveness of price signaling equilibration. This also lets us study the rate of external noise that a market can tolerate and still maintain near-equilibrium prices.

Date: 2016-02
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Published in J. Math. Econ. 2021, page 102475

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