A pitchfork bifurcation in the tatonnement process★ |
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Authors: | Venkatesh Bala |
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Institution: | (1) Department of Economics, McGill University, 855 Sherbrooke St. W., Montreal, CANADA H3A 2T7, CA |
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Abstract: | Summary . This note extends the example of Gale (1963) by considering the continuous time tatonnement process for a class of two agent,
two commodity exchange economies, parametrized by a number μ∈(0,1). We demonstrate that as the parameter passes a threshold
value μ* the unique, globally stable competitive equilibrium loses local stability while two new locally stable equilibria appear.
Intuitively, as μ increases the income effect become increasingly more important relative to substitution effect, and eventually
overwhelms the latter. As the parameter μ approaches 1, the economy tends to the example considered by Gale, as does the limiting
behavior of the tatonnement.
Received: February 28, 1996; revised version August 5, 1996 |
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Keywords: | JEL Classification Numbers: C62 D50 |
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