Analysis of a Dynamic, Decentralized Exchange Economy

Abstract

A dynamic exchange economy model is presented. Similarly to the Walrasian equilibrium problem, each consumer is characterized by a feasible set and by an instantaneous demand function, that depends on the price vector, time, and the commodity holding. The commodity holding of each consumer varies according to his instantaneous demand function at each moment. We show that the market can choose prices that will lead the commodity holding of each consumer to remain in his consumption set while the aggregate commodity holding satisfies the scarcity constraints of the market.