Power method tâtonnements for Cobb-Douglas economies (Q1745656)

The competitive equilibrium model with Cobb-Douglas utilities is introduced, derives the demand functions and introduces assumptions that ensures existence of at least one equilibrium. Tátonnement, a concept introduced by French economist Leon Walras, is a trial-and-error process by which equilibrium prices and stability are reached in competitive markets. The tátonnement algorithms is introduced -- with and without averaging. In this paper, regular Cobb-Douglas economies is defined, as having symmetric access, no submarkets, and being pairwise connected. Regularity of Cobb-Douglas economies is shown to be stable w.r.t. sufficiently small perturbations of consumers' tastes and endowments. The pairwise connectivity remaind valid under sufficiently small perturbations of consumers' tastes and endowments. Moreover, the property of pairwise connectivity holds for almost all Cobb-Douglas ecconomies.