Probability of survival in a random exchange economy with dependent agents

Hashimzade, N. (2003) Probability of survival in a random exchange economy with dependent agents. Economic Theory, 21 (4). pp. 907-912. ISSN 1432-0479 doi: 10.1007/s00199-002-0258-y

Abstract/Summary

In this paper I analyze the general equilibrium in a random Walrasian economy. Dependence among agents is introduced in the form of dependency neighborhoods. Under the uncertainty, an agent may fail to survive due to a meager endowment in a particular state (direct effect), as well as due to unfavorable equilibrium price system at which the value of the endowment falls short of the minimum needed for survival (indirect terms-of-trade effect). To illustrate the main result I compute the stochastic limit of equilibrium price and probability of survival of an agent in a large Cobb-Douglas economy.