Chapter 44 Multiple Market Systems and the Classical Principles of Price Dynamics in General Equilibrium

Theoretically, it is not the case that markets will necessarily equilibrate even when the equilibrium is a unique, interior equilibrium. In his example prices always orbit around the equilibrium and thus never converge. That platform thus provides the starting point of the research. For the parameters of his example, either the markets will not equilibrate, as predicted by theory, or the basic principle of dynamics he employed is substantially wrong. The Scarf example is ideal for a study of classical dynamics because in that situation the theory makes striking and unexpected predictions. The conditions under which markets will equilibrate, and therefore the frequency with which equilibration might be expected, depend on the nature of the process of equilibration and the underlying principles of dynamics.