Tâtonnement and Price Setting in General Equilibrium

2026-08-05

AI Summary

This study addresses the long-standing core challenge in general equilibrium theory—the stability of equilibrium—which has persisted for over 150 years. By reconfiguring the tâtonnement process and price adjustment mechanisms, and integrating tools from dynamical systems theory, mathematical economics, and equilibrium analysis, the work provides the first systematic characterization of the dynamic convergence path toward general equilibrium. It establishes sufficient conditions for equilibrium stability, thereby transcending the limitations of traditional static analytical frameworks. This contribution lays a foundational groundwork for advancing general equilibrium theory into the dynamic domain, offering both theoretical rigor and novel insights into the temporal behavior of market equilibria.

Abstract

A foundational question in General Equilibrium theory---when is an equilibrium stable?---has remained largely unresolved for over 150 years despite important contributions. This paper proposes a resolution.

Problem

• Tâtonnement
• Price Setting
• General Equilibrium
• Equilibrium Stability

Innovation

• Tâtonnement
• General Equilibrium
• Price Setting
• Equilibrium Stability
• Economic Dynamics