Abstract
This paper reviews the articles with the focus on the validation of the notions of different equilibria in irrational markets. In all those articles, the evolutionary idea of natural selection is used to explain the eventual occurrences of different equilibria in different market processes where individuals are irrational. The future research direction in this area is also mentioned.
Highlights
In the traditional economic theory, equilibria are derived from optimal choices made by perfectly rational economic agents
The approach used in these articles is based on the evolutionary idea of natural selection
Natural selection is replaced by market selection where the economic agents with the most wealth survive and others disappear or become unimportant
Summary
In the traditional economic theory, equilibria are derived from optimal choices made by perfectly rational economic agents. Can any equilibrium be established when economic agents are irrational? This paper reviews the articles addressing these questions. [3]) examining the market selection hypothesis, few papers devote their attentions to the validation of the equilibrium notions. The articles reviewed here focus on justifying the equilibrium notions of perfect competition, monopolistic competition and informationally efficient equilibrium by using the evolutionary approach. The section discusses the articles supporting the notions of perfectly competitive equilibrium and monopolistically competitive equilibrium. It briefly discusses articles addressing the market selection over firms.
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