The Limit-price dynamics - uniqueness, computability and comparative dynamics in competitive markets

Gaël Giraud

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: In this paper, a continuous-time price-quantity trading process is defined for exchange economies with differentiable characteristics. The dynamics is based on boundedly rational agents exchanging limit-price orders to a central clearing house, which rations infinitesimal trades according to Mertens (2003) double auction. Existence of continuous trade and price curves holds under weak conditions and in particular even if there is no long-run competitive equilibrium. Every such curve converges towards a Pareto point, and every Paretian allocation is a locally stable rest-point. Generically, given initial conditions, the trade and price curve is piecewise unique, smooth and computable, hence enables to effectively perform comparative dynamics. Finally, in the 2 x 2 case, the vector field induced by the limit-price dynamics is real-analytic

Keywords: Non-tatonnement; price-quantity dynamics; limit-price mechanism; myopia; computable general equilibrium (search for similar items in EconPapers)
JEL-codes: C02 C61 C62 C63 D46 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2007-04
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Related works:
Working Paper: The Limit-Price Dynamics — Uniqueness, Computability and Comparative Dynamics in Competitiive Markets (2007)
Working Paper: The Limit-Price Dynamics — Uniqueness, Computability and Comparative Dynamics in Competitiive Markets (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:b07020

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