Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 06/07: Market clearing and price formation

Sjur Didrik Flåm () and Odd Godal ()
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Sjur Didrik Flåm: University of Bergen, Department of Economics, Postal: Hermann Fossgt. 6, N-5007 Bergen, Norway
Odd Godal: INSTITUTE FOR RESEARCH IN ECONOMICS AND BUSINESS ADMINISTRATION, Postal: Breiviksveien 40, N-5045 Bergen, Norway

Abstract: Considered here is decentralized exchange of privately owned commodity bundles. Voluntary transactions take the form of repeated bilateral barters. Under broad and reasonable hypotheses the resulting process converges to comepetitive equilibrium. Price-taking behavior is not assumed. Prices emerge over time; they need neither be anticipated nor known at any interim stage.

Keywords: exchange economies; price equilibrium; stochastic approximation.

JEL-codes: C61; C72; C90; D51; D80

25 pages, April 27, 2007

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