Price Dynamics through Expectations, and the Role of Money Herein. Steudle, G., Yang, S., & Jaeger, C. Working Paper GCF arxiv 1610.05583, 2016.
Price Dynamics through Expectations, and the Role of Money Herein [link]Paper  abstract   bibtex   
In the canonical Arrow-Debreu framework, equilibrium prices are set by a fictitious auctioneer. Removing that fiction raises the question of how prices are set and adjusted by decentralised actors with incomplete information. This paper considers a very basic model of two aggregate agents (household and firm) with two commodities (labour, consumption good) and an out-of-equilibrium price dynamics based on expectations and learning of the firm. The system tends towards economic equilibrium, however, depending on the initial parameters it might not be able to get there. Different "degrees" of money are introduced: in a first step, money only serves to store value over time; in another version it constitutes a fully adequate third good. The introduction of money as a store of value facilitates the system reaching economic equilibrium, for the introduction of money as a third commodity, the system dynamics in general becomes more complex.
@article{steudle2016price,
abstract = {In the canonical Arrow-Debreu framework, equilibrium prices are set by a fictitious auctioneer. Removing that fiction raises the question of how prices are set and adjusted by decentralised actors with incomplete information. This paper considers a very basic model of two aggregate agents (household and firm) with two commodities (labour, consumption good) and an out-of-equilibrium price dynamics based on expectations and learning of the firm. The system tends towards economic equilibrium, however, depending on the initial parameters it might not be able to get there. Different "degrees" of money are introduced: in a first step, money only serves to store value over time; in another version it constitutes a fully adequate third good. The introduction of money as a store of value facilitates the system reaching economic equilibrium, for the introduction of money as a third commodity, the system dynamics in general becomes more complex.},
archivePrefix = {arXiv},
arxivId = {1610.05583},
author = {Steudle, Gesine and Yang, Saini and Jaeger, Carlo},
eprint = {1610.05583},
journal = {Working Paper GCF arxiv 1610.05583},
keywords = {DOLFINS{\_}T1.3,DOLFINS{\_}WP1,DOLFINS{\_}working{\_}paper},
mendeley-tags = {DOLFINS{\_}T1.3,DOLFINS{\_}WP1,DOLFINS{\_}working{\_}paper},
title = {{Price Dynamics through Expectations, and the Role of Money Herein}},
url = {https://arxiv.org/abs/1610.05583},
year = {2016}
}

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