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- Title
Emergence of price-taking Behavior.
- Authors
Flåm, Sjur Didrik
- Abstract
Price-taking behavior is the bedrock of much market theory. How might such behavior emerge? Addressing that old but still intriguing question, this paper uses a money commodity to denominate all rates of exchange and substitution. Out of equilibrium, some rates differ between agents, thereby driving trade. The simplest form of trade is bilateral; it needs no broker, center or supervisor. Yet, under broad conditions, that elementary institution can take the economy to competitive equilibrium. Proving convergence, this paper invokes minimal hypotheses as to agents' behaviors, competences and deals. Moreover, agents may make boundary choices, appreciate relatively few commodities, choose within general domains and deploy non-smooth preferences. Convex analysis provides the chief tool kit.
- Subjects
PAPER money; FOREIGN exchange rates; BEHAVIOR; MARKETING theory; COMMERCIAL products
- Publication
Economic Theory, 2020, Vol 70, Issue 3, p847
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s00199-019-01232-5