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Disequilibrium trade and the dynamics of stock markets
Umeå University, Faculty of Social Sciences, Centre for Regional Science (CERUM).
2014 (English)In: Complexity in economics: cutting edge research / [ed] Marisa Faggini, Anna Parziale, Springer-Verlag New York, 2014, 225-245 p.Chapter in book (Refereed)
Abstract [en]

The present work considers pricing and trade dynamics for stock commodity markets, which, unlike flow commodity markets have been little studied, if at all. Concepts and tools in economics are shaped to deal with flow markets, where commodities disappear in each period and then reemerge. This allows one to define unique demand and supply functions and their equilibria. A durable commodity, a stock, in contrast, remains on the market to the next period and may just change owner through exchange. This, however, changes demand and supply functions, and hence the equilibrium state to which a dynamic process may be heading. Dynamic processes are provided with memory of the actual exchange history. We also need to state how disequilibrium trade in stock markets takes place. This is another neglected issue, though a fact of reality. Using a case with only two traders of two stock commodities, and focusing pure trade, it is possible to specify the exact conditions for disequilibrium trade in each step of the dynamic process. In the end any of an infinity of equilibria can be reached, or trade can stick in some disequilibrium point while complex, even chaotic, price dynamics goes on.

Place, publisher, year, edition, pages
Springer-Verlag New York, 2014. 225-245 p.
, New economic windows, ISSN 2039-411X
Keyword [en]
disequilibrium trade, durable commodity markets, complex dynamics, multiple equilibria, path dependence
National Category
Business Administration
URN: urn:nbn:se:umu:diva-96522DOI: 10.1007/978-3-319-05185-7_12ISI: 000343052900013ISBN: 978-3-319-05185-7ISBN: 978-3-319-05184-0OAI: diva2:765410
Available from: 2014-11-23 Created: 2014-11-21 Last updated: 2014-11-23Bibliographically approved

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