Equilibrium attainment vs. equilibrium necessities
Equilibrium attainment vs. equilibrium necessities
This chapter is about Kenneth Arrow’s 1959 article about price adjustment. This chapter uses that article to explain the logical requirements of any equilibrium model that purports to explain, say, equilibrium prices. Arrow explains why just assuming maximization on the part of both demanders and supplier in a market is not enough to assure equilibrium attainment. Arrow rejects the usual textbooks’ addition of an additional assumption that the markets are already at equilibrium. He instead argues that explicitly assumptions about the dynamics of equilibrium attainment must be included in any equilibrium model. The chapter thus discusses price adjustment in formal models; equilibrium attainment as an explicit process. It recognizes that Arrow equilibrium attainment also need something like imperfect competition to deal with any disequilibrium state that would necessarily exist prior to equilibrium attainment.
Keywords: equilibrium price, equilibrium attainment, imperfect competition, price adjustment, Kenneth Arrow
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