Article ID: | iaor1995588 |
Country: | United States |
Volume: | 19 |
Issue: | 2 |
Start Page Number: | 341 |
End Page Number: | 351 |
Publication Date: | May 1994 |
Journal: | Mathematics of Operations Research |
Authors: | Talman Dolf, Laan Gerard van der, Elzen Antoon van den |
Keywords: | adaptive processes |
In this paper an adjustment process for a general equilibrium model with linear production technologies is given. The process reaches an equilibrium in the economy by simultaneous adaptations of prices and activity levels. Initially the prices of the commodities in excess demand are relatively increased and the prices of the commodities in excess supply are relatively decreased. First have only a positive activity level when they make zero profit. An important feature of the process is that it keeps track of the location of the starting price vector throughout its operation. Furthermore, the choice of the starting price vector is only limited by economic considerations. Besides, the process converges under rather weak conditions and processes an appealing economic interpretation.