Published on November 10, 2016 by Microsoft Research

In a free market, the rise or fall of a price signals excess demand or supply. If the dynamics of price adjustment work well, signaling can enable goods to clear and prices to equilibrate. This is after all the rationale for studying equilibrium theories. A fundamental question about a market is therefore under what conditions, and then how rapidly, does price signaling cause price equilibration. Qualitatively, this ought to depend on how well-connected the market is. We address this question quantitatively, and characterize how the algebraic connectivity of the market determines the effectiveness of price signaling equilibration. This also provides a framework for studying the level of external noise that a market can tolerate and still maintain near-equilibrium prices. Our work is within a standard model: Arrow-Debreu markets with Samuelson’s continuous-time proportional tatonnement dynamics. Joint work with Leonard Schulman (Caltech)

See more on this video at www.microsoft.com/en-us/research/video/invisible-hand-laplace-role-market-structure-price-convergence-oscillation/

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3 Comments on "The Invisible Hand of Laplace: The Role of Market Structure in Price Convergence and Oscillation"

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DinHamburg
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DinHamburg
24 days 58 minutes ago

IS there a free market ? I am only aware of distorted markets (stock market vs HFT, big investors; crude oil vs OPEC; cocoa/coffee vs big companys which buy half the harvest not for producing chocolate but for controlling the price)

Michael Charles
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Michael Charles
28 days 7 hours ago
Its better to have thinking and technology that is priceless, rather than thinking (&) technology "marked" with a price. A price that greedy people from India and beastly people from elsewhere can "mark up". This is Michael the Archangel here. Standing.. by:. 1n America and for Native and indigenous Latino American Peoples of the Americas who's way has been free and free of greedy European and Hindi corruption.. for eons.:2emember, tHis is Our Homeland and Our economy and Our food supply. You need Us more than We need you.. employees of Microsoft Inc. that We can repossess and replace if… Read more »
Doug Benet
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Doug Benet
28 days 11 hours ago

Please improve video quality upload!

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