A globally and universally stable price adjustment process

Abstract

A price adjustment process for an exchange economy is given that converges generically to a Walrasian equilibrium. The assumptions made with respect to consumptions sets, preference and initial endowments are standard. No restrictions are made with respect to the starting price system. The well-known fact that the number of Walrasian equilibria is generically odd follows as a special case of the main theorem. In the case of gross substitutability of demand functions convergence always takes place even without making differentiability assumptions. In this special case, the prices of commodities in excess demand (supply) are strictly increasing (decreasing), and therefore the qualitative behaviour of the process resembles the Walrasian tatonnement process. Moreover, on every market the absolute value of the total excess demand is monotonically decreasing.