Showing papers by "Aalto University published in 1979"

Non-Trivial Equilibrium in an Economy With Stochastic Rationing

Abstract: Stochastic rationing when the market does not clear draws attention because both Dreze (1975) and Benassy (1975) quantity-constrained equilibria have some undesirable features. Gale (1978)gave the existence proof of trade under uncertainty. His stochastic rationing depends on all the individual effective demands. It is too vague to characterize a rationing mechanism. Moreover, his assumption to ensure a non-trivial equilibrium is economically not clear. In this paper we extend Green (1978) to characterizing the rationing scheme as the individual effective demand times the rationing number which is a function of the aggregate quantity signals. We also construct an economy with money and overlapping generations. We show the existence of the non-trivial equilibrium and provide an example of a non-Wairasian equilibrium at the Walrasian equilibrium prices.

A Stochastic Approach to Disequilibrium Macroeconomics

Abstract: In this paper, our aim is to develop an alternative approach to analyzing a macroeconomic model where markets do not clear. Earlier approaches have had difficulties in interpreting effective demand, a key concept in disequilibrium macroeconomics. We propose a new definition of effective demand similar to that of Svensson, Gale, and Green. Given the states of the markets, there is in general uncertainty about the amount of trades individuals can complete. Considering this uncertainty, each individual has to make binding trade offers, i.e., effective demands, a fraction of which will be actually transacted. Using the newly-defined effective demand, we define the rationing equilibrium as a fixed point of disequilibrium signals. We analyze various regimes of rationing equilibria. The most startling conclusion is the multiplicity of equilibria: (1) given wages and prices, there may exist more than one type of equilibrium and (ii) even at Wairasian prices there may exist non-Walrasian equilibria, and these are usually stable with respect to a quantity-adjustment mechanism while the Wairasian equilibrium is unstable, The comparative-static properties of policy we also considered, and they are comparable to those of the earlier approach.

Marketing Strategy Formulation — Pure versus Mixed Strategies

Abstract: The paper considers Kotler's competitive model and increases the number of possible marketing strategies available by taking into account the combinations of the strategy alternatives. From the larger set of marketing strategies, the optimal strategy or strategies is identified. The objective function of the firm is found to be satisfied better by the combined strategy rather than by the best strategy from the set used by Kotler. The optimal combined strategy is found by a heuristically optimizing SDRDYN-algorithm suitable to simulation studies. As is expected, the larger set of strategy alternatives considered enable the firm to increase the value of its objective function.