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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
You can always find the topics here!Topics: Prices, Commodities, Excess demand, Farm economics, Economic fluctuations, Market prices, Economic expectations, Commodity prices, Matrices, Eigenvalues
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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