Walrasian Equilibrium in an Exchange Economy with Indivisibilities

Jinpeng Ma () and Fusheng Nie ()
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Fusheng Nie: Philadelphia Stock Exchange

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: This paper studies an exchange economy with indivisibilities. Our main goal is to see if a price system can function well in an economy (e.g., an economy with complementary preferences) that does not have a Walrasian equilibrium. We study the price adjustment processes governed by the Euler iterative scheme. We show that in an economy that has a Walrasian equilibrium, our price adjustment processes have a common uniform limit that is unique and converges to a Walrasian equilibrium price vector in finite time. Surprisingly, in an economy that does not have a Walrasian equilibrium, our price adjustment processes also have a common uniform limit that is unique and converges to a market equilibrium price vector in finite time. Moreover, market equilibrium prices coincide with Walrasian equilibrium ones in an economy that has a Walrasian equilibrium. Further, there are no prices other than the Walrasian or market equilibrium ones that have such a property of global stability.

Keywords: Walrasian (search for similar items in EconPapers)
JEL-codes: D71 (search for similar items in EconPapers)
Date: 2002
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Journal Article: Walrasian equilibrium in an exchange economy with indivisibilities (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:200207

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