A close eye on the invisible hand

Abstract

The paper shows how, and under what minimal information supply conditions, a market finds its competitive equilibrium price and thus solves the so-calledtatonnement process, without sellers and buyers knowing the equilibrium price in advance. The information premises must be understood as a basic first approach, and do not necessarily mimic the real market process. Demonstration of a discovery process under these information handling conditions is an important finding for an evolutionary market theory. Additional information-processing elements should augment the efficiency of the discovery process. The results of the simulated market process set out above raise new questions. The role of institutional elements (such as the relevance of demand flexibility or “certainty” of knowledge in the learning process, etc.) is discussed further outside the context of the simulation model, providing new insight into the market process.