We study a pure exchange economy with infinite-lived agents, in which a share of consumption purchases must be paid cash. The economy may exhibit multiple equilibria, no matter what the fundamental specification, the only requirement being a share of consumption to be paid cash sufficiently low. Complex dynamics, such as chaos and cycles of eny periodicity, can emerge under gross substitutability, a condition usually known for eliminating such phenomena.
Plausibility of Indeterminacy and Complex Dynamics
CAZZAVILLAN, Guido;
2005-01-01
Abstract
We study a pure exchange economy with infinite-lived agents, in which a share of consumption purchases must be paid cash. The economy may exhibit multiple equilibria, no matter what the fundamental specification, the only requirement being a share of consumption to be paid cash sufficiently low. Complex dynamics, such as chaos and cycles of eny periodicity, can emerge under gross substitutability, a condition usually known for eliminating such phenomena.
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