Some Examples of Global Instability of the Competitive Equilibrium

Herbert Scarf

No 79, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: In this paper we consider the problem of stability of the competitive equilibrium. The market demand functions are sums of individual demand functions obtained directly by utility maximization. The rate of change of the price of each commodity is assumed to be proportional to the excess market demand for that commodity. A number of examples are given for which the motion of the prices is globally unstable in the sense that starting from any set of prices other than equilibrium, the prices oscillate without tending towards equilibrium.

Pages: 23 pages
Date: 1959
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Citations: View citations in EconPapers (37)

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