General Equilibrium Theory with Market Frictions. Part I. Quantity Equilibrium with Rational Expectations.

Abstract

This paper demonstrates the existence of a rational expectations, quantity equilibrium in a general equilibrium model of an economy with market fritions. A market is said to have frictions if buyers and sellers have trouble finding each other, if it is costly for them to search for each other, and if it is costly to wait to buy or sell. Equilibrium is a stationary probability distribution over the set of possible time paths of states of the economy. This equilibrium reflects rational expectations if all agents know the stationary distribution of the variables they observe and if they exploit this information. Prices are fixed and are not necessarily equilibrium prices in any sense. (Author)

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Document Details

Document Type
Technical Report
Publication Date
Sep 01, 1978
Accession Number
ADA065729

Entities

People

  • Truman Bewley

Organizations

  • Harvard University

Tags

Communities of Interest

  • Materials and Manufacturing Processes

DTIC Thesaurus Topics

  • Economics
  • Employment
  • Equations
  • Ergodic Processes
  • Markov Processes
  • Money
  • Numbers
  • Point Theorem
  • Probability
  • Probability Distributions
  • Production
  • Random Variables
  • Real Numbers
  • Steady State
  • Stochastic Processes
  • Theorems
  • Topology

Fields of Study

  • Economics

Readers

  • Educational Psychology
  • Government Contracting/Procurement.
  • Operations Research