Munich Personal RePEc Archive

On Non-Tatonnement Processes

Sambracos, Evangelos and Yannelis, Dimitris (1993): On Non-Tatonnement Processes.

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Abstract

The objective of this study is to examine the stability of a general equilibrium model in which trade takes place at non-equilibrium prices. Quantity constraints are perceived by the traders and effective demands and supplies are explicitly derived from utility and profit maximization. Therefore, spillover effects are taken into account whenever a quantity constraint is binding. Furthermore, we resolve the problem of bankruptcy as follows. Traders, in maximizing their objective functions, plan at the same time not to go bankrupt, by constraining their behavior explicitly. Such a constrained behavior assigns to money a role as a medium of exchange. The system is shown to be globally stable, when both prices and quantity constraints adjust in disequilibrium.

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