Econometrica: Jan 1980, Volume 48, Issue 1

Methods of Estimation for Multi-Market Disequilibrium Models

https://doi.org/0012-9682(198001)48:1<97:MOEFMD>2.0.CO;2-Z
p. 97-126

Takatoshi Ito

Methods of estimation for markets in disequilibrium have been limited to the single-market case. However, the spill-over effects of the unsatisfied demand or supply in other markets are considered to be an essential feature of disequilibrium analysis. This paper (i) develops a two-market disequilibrium model that is amenable to estimation; (ii) provides the maximum likelihood method and the two-stage least squares method for estimation; and (iii) generalizes this disequilibrium model to the n-market case, showing sufficient conditions for the existence and uniqueness of a quantity-constrained equilibrium--i.e., for its solvability as an econometric model.

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