Discussion: An Intertemporal Price Equilibrium Model

Abstract

that such an idealized model will help set the stage for fruitful analysis of more realistic markets and in its present form will be applicable for certain meaningful analyses. Also, the model presented is a finite horizon model. Since the future is infinitely long, we have maximized (3) over a finite time span by specifying a final level of inventory and obtaining a maximizing solution for such a level. To obtain the right final level of inventory, the question can only be answered by extending our time period further. This, however, leads us into an infinite regression, which means we must go beyond any finite time period. One practical way around this difficulty is to either obtain maximizing solutions for alternative levels of final inventories or to set up the objective function so as to minimize the deviations from the highest attainable level of payoff or satisfaction.12 The formulation is amenable to a variety of time ordered production patterns and thus should have many applications to practical problems of price adjustment and allocation over time and the algorithm suggested is efficient for obtaining a solution.