Economics, Econometrics and Finance
4 years ago

Global instability in market prices leads to chaotic economic fluctuations.

International Economic Review
Some Examples of Global Instability of the Competitive Equilibrium
Herbert E. Scarf

Paper Summary

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The article explores the stability of competitive equilibrium in markets. By analyzing how prices change based on demand, the researchers found that in certain cases, prices can oscillate without reaching equilibrium. This means that starting from any non-equilibrium prices, the market prices will keep fluctuating instead of settling down.