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A Note on Expectations and Stability
Kenneth J. Arrow and Marc Nerlove
Vol. 26, No. 2 (Apr., 1958), pp. 297-305
Published by: The Econometric Society
Stable URL: http://www.jstor.org/stable/1907591
Page Count: 9
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Demand and supply depend in general not only on current prices but also on expectations. If it is assumed that expectations are formed from past prices in the adaptive way suggested by Cagan and others, it is shown that under certain circumstances the resulting system of multiple markets has dynamic stability.
Econometrica © 1958 The Econometric Society