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Junichi Minagawa
 
''On the instability of competitive equilibrium: a further example''
( 2012, Vol. 32 No.1 )
 
 
It is shown that a Walrasian price adjustment process fails to converge to an equilibrium in an exchange economy with three consumers and three commodities, where each consumer has a quasilinear utility function, desires only two commodities, and demands positive amounts of both commodities. The instability is due to weak substitution effects in addition to asymmetrical income effects.
 
 
Keywords: Exchange economy, Instability, Quasilinear utility
JEL: D5 - General Equilibrium and Disequilibrium: General
 
Manuscript Received : Apr 21 2011 Manuscript Accepted : Jan 13 2012

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