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| Junichi Minagawa |
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| ''On the instability of competitive equilibrium: a further example'' |
| ( 2012, Vol. 32 No.1 ) |
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| 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. |
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| Keywords: Exchange economy, Instability, Quasilinear utility |
JEL: D5 - General Equilibrium and Disequilibrium: General
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| Manuscript Received : Apr 21 2011 | | Manuscript Accepted : Jan 13 2012 |
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