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Algorithmic models of market equilibrium

Author

Listed:
  • NESTEROV, Yu.

    (Université catholique de Louvain, CORE, Belgium)

  • SHIKHMAN, Vladimir

    (Université catholique de Louvain, CORE, Belgium)

Abstract
In this paper we suggest a new framework for constructing mathematical models of market activity. Contrary to the majority of the classical economical models (e.g. Arrow- Debreu, Walras, etc.), we get a characterization of general equilibrium of the market as a saddle point in a convex-concave game. This feature significantly simplifies the proof of existence theorems and construction of the adjustment processes both for producers and consumers. Moreover, we argue that the unique equilibrium prices can be characterized as a unique limiting point of some simple price dynamics. In our model, the equilibrium prices have natural explanation: they minimize the total excessive revenue of the market’s participants. Due to convexity, all our adjustment processes have unambiguous behavioral and algorithmic interpretation. From the technical point of view, the most unusual feature of our approach is the absence of the budget constraint in its classical form.

Suggested Citation

  • NESTEROV, Yu. & SHIKHMAN, Vladimir, 2013. "Algorithmic models of market equilibrium," LIDAM Discussion Papers CORE 2013066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2013066
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2013.html
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    References listed on IDEAS

    as
    1. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-392, May.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
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    Cited by:

    1. NESTEROV, Yurii & SHIKHMAN, Vladimir, 2015. "Algorithm of price adjustment for market equilibrium," LIDAM Discussion Papers CORE 2015001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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