Analysis of a dynamic, decentralized exchange economy (Q1084001)

A dynamic exchange economy model is presented and analyzed. One can think of it as a stock exchange. Every agent is described by his consumption and his instantaneous demand function, that depends on the price vector, time, and the commodity holding. The commodity holding of each consumer varies, at each moment, according to this instantaneous demand function. The author shows that the market can choose prices that keep the commodity holding of each consumer within his consumption set, while ensuring that the aggregate commodity holding satisfies the scarcity constraint of the market.