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Equilibrium Models in EconomicsPurposes and Critical Limitations$
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Lawrence A. Boland

Print publication date: 2017

Print ISBN-13: 9780190274320

Published to Oxford Scholarship Online: May 2017

DOI: 10.1093/acprof:oso/9780190274320.001.0001

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Equilibrium models vs. realistic understanding

Equilibrium models vs. realistic understanding

Chapter:
(p.107) Chapter 8 Equilibrium models vs. realistic understanding
Source:
Equilibrium Models in Economics
Author(s):

Lawrence A. Boland

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780190274320.003.0009

In the real world, the process of reaching the assumed equilibrium involves decision makers’ knowledge and their awareness of any disequilibrium. Equilibrium attainment also requires their making the correct decisions required for a ‘stable’ equilibrium. Any model which fails to explicitly address the equilibrium process and its requirements is vulnerable to criticism of the model’s realism. This chapter explores, specifically, whether the knowledge required to reach equilibrium can ever be attained by participants, whether the process of obtaining that knowledge can be consistent with the requirements of achieving an equilibrium. It also explores the ‘ignorant consumer’ who has no way of knowing that he or she is not maximizing.

Keywords:   disequilibrium awareness, stable equilibrium, equilibrium attainment, knowledge requirements, ignorant consumer

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