A dynamical, pure exchange economy with feedback pricing

This paper examines a decentralized, dynamical, pure exchange economy in which changes in an individual consumers demand depend on his own consumption and on prices. An ‘instantaneous Walras law’ provides a sufficient condition for the existence of viable exchange trajectories. Such dynamic demand systems might result from goalseeking behavior of the March-Simon type, or when satisfaction of well defined preferences is continually improved through incremental adjustments in consumption. In contrast to Walrasian tâtonnement or Sinale's price adjustment model, prices in the present study follow a feedback control law that responds only to current consumer states. Various generalizations are also presented.