Publication Type
Journal Article
Version
publishedVersion
Publication Date
2-2004
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.
Keywords
coordination, markets, rationalizability, stability
Discipline
Economic Theory
Research Areas
Economic Theory
Publication
Journal of Economic Theory
Volume
114
Issue
2
First Page
255
Last Page
279
ISSN
0022-0531
Identifier
10.1016/S0022-0531(03)00105-4
Publisher
Elsevier
Citation
CHATTERJI, Shurojit and GHOSAL, Sayantan.
Local coordination and market equilibria. (2004). Journal of Economic Theory. 114, (2), 255-279.
Available at: https://ink.library.smu.edu.sg/soe_research/1889
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/S0022-0531(03)00105-4