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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