Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets

Donald Brown () and Chris Shannon ()

No 1170, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper studies the extent to which qualitative features of Walrasian equilibria are refutable given a finite data set. In particular, we consider the hypothesis that the observed data are Walrasian equilibria in which each price vector is locally stable under tatonnement. Our main result shows that a finite set of observations of prices, individual incomes and aggregate consumption vectors is rationalizable in an economy with smooth characteristics if and only if it is rationalizable in an economy in which each observed price vector is locally unique and stable under tatonnement. Moreover, the equilibrium correspondence is locally monotone in a neighborhood of each observed equilibrium in these economies. Thus the hypotheses that equilibria are locally stable under tatonnement, equilibrium prices are locally unique and equilibrium comparative statics are locally monotone are not refutable with a finite data set.

Pages: 15 pages
Date: 1998-02
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Published in Econometrics (2000), 68(6): 1529-1539 and D.J. Brown and F. Kubler, eds., Computational Aspects of General Equilibrium Theory: Refutable Theories of Value, Springer-Verlag, 2008

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Related works:
Journal Article: Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets (2000)
Working Paper: Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets (1998)
Working Paper: Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets (1997)
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