On a possible interpretation of market dynamics based on the internal model principle (Q751461): Difference between revisions

The aim of the paper is to deal with the question: What is the structure of an economic market which is capable of showing both stable prices and a perfectly predictable equilibrium process?, by considering the market as a fairly general dynamical control system. It is assumed that this system possesses properties which imply that it is subject to the so- called ``internal model principle'' (IMP): the regulator which controls the system generates a model of the dynamic structure of the system. This principle (a theorem by \textit{J. S. A. Hepburn} and \textit{W. W. Wonham} [see e.g. IEEE Trans. Autom. Control AC-29, 397-403 (1984; Zbl 0543.93028)]) is stated and obtained within the framework of nonlinear control systems theory. The paper thus suggests a way to reconcile a dynamical systems approach with approaches taken by static equilibrium theory to market price generating mechanisms.