Eductive stability in sequential exchange economies: an introduction.

This paper provides a survey of results concerning "eductive stability" of equilibrium in an abstract 2-period exchange economy. "Eductive stability" is based on the Common Knowledge considerations underlying the work reported in the book "Assessing rational expectations: "eductive" stability in economics" from which this paper is a chapter. "Iteratively Expectational stability" is a necessary condition of "eductive stability": conditions for IE stability as well as for local "eductive stability" are provided and discussed: these conditions stress a key role for the income effects of savings decisions as well as for their sensitivity to relative prices tomorrow.