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Iterative Price Mechanisms
Donald G. Saari
Abstract
It is shown that if an iterative price mechanism depends only upon a finite amount of information from the market as given by the aggregate excess demand function, then this mechanism cannot always be effective. That is, there are pure exchange economies where this mechanism will not find a price equilibrium. This statement already holds in the case of two commodities. The approach used to reach this conclusion extends to other iterative systems used to determine the zeros of a function.
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