Local coordination and market equilibria

Chatterji, S. and Ghosal, S. (2004) Local coordination and market equilibria. Journal of Economic Theory, 114(2), pp. 255-279. (doi:10.1016/S0022-0531(03)00105-4)

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Abstract

We reformulate the local stability analysis of market equilibria in a competitive market as a local coordination problem in a market game, where the map associating market prices to best-responses of all traders is common knowledge and well-defined both in and out of equilibrium. Initial expectations over market variables differ from their equilibrium values and are not common knowledge. This results in a coordination problem as traders use the structure of the market game to converge back to equilibrium. We analyse a simultaneous move and a sequential move version of the market game and explore the link with local rationalizability.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Ghosal, Professor Sayantan
Authors: Chatterji, S., and Ghosal, S.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Economic Theory
ISSN:0022-0531
ISSN (Online):1095-7235

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