The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Gross Substitutes

  • Lionel W. McKenzie
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1115

Abstract

The gross substitute assumption is used to establish the existence and uniqueness of an equilibrium and to prove the equilibrium to be stable for a dynamic adjustment system for prices. The gross substitute assumption also implies results of comparative statics, that is, results on the displacement of equilibrium that follows from shifts in demand or changes in initial stocks. The concept of gross substitutes was introduced by Mosak (General equilibrium theory in international trade. Bloomington: Principia Press, 1944) in the context of a pure trading model. A definition with wider application is the one used by Morishima (Equilibrium, stability and growth. Oxford: Clarendon Press, 1964).

Keywords

Comparative statics Excess demand Existence of equilibrium Global stability theorems Gross substitutes Income effect Revealed preference Stability Substitution effect Tâtonnement Temporary equilibrium Uniqueness of equilibrium Walras’s Law Weak gross substitutes 

JEL Classifications

D0 
This is a preview of subscription content, log in to check access.

Bibliography

  1. Arrow, K.J., and F.H. Hahn. 1971. General competitive analysis. San Francisco: Holden-Day.Google Scholar
  2. Arrow, K.J., and L. Hurwicz. 1958. On the stability of the competitive equilibrium, I. Econometrica 26: 522–552.CrossRefGoogle Scholar
  3. Arrow, K.J., and L. Hurwicz. 1960. Competitive stability under weak gross substitutability: The ‘Euclidean distance approach’. International Economic Review 1: 38–49.CrossRefGoogle Scholar
  4. Arrow, K.J., and L. Hurwicz. 1962. Competitive stability under weak gross substitutability: Nonlinear price adjustment and adaptive expectations. International Economic Review 3: 233–255.CrossRefGoogle Scholar
  5. Bassett, L., H. Habibagahi, and J. Quirk. 1967. Qualitative economics and Morishima matrices. Econometrica 35: 221–233.CrossRefGoogle Scholar
  6. Cheng, H.-C. 1979. Linear economies are ‘gross substitute’ systems. Journal of Economic Theory 20: 110–117.CrossRefGoogle Scholar
  7. Debreu, G. 1970. Economies with a finite set of equilibria. Econometrica 38: 387–392.CrossRefGoogle Scholar
  8. Gale, D. 1976. The linear exchange model. Journal of Mathematical Economics 3: 205–259.CrossRefGoogle Scholar
  9. Hicks, J.R. 1939. Value and capital. Oxford: Clarendon Press.Google Scholar
  10. Howitt, P. 1980. Gross substitutability with multi-valued excess demand functions. Econometrica 48: 1567–1575.CrossRefGoogle Scholar
  11. McKenzie, L.W. 1960. Stability of equilibrium and the value of positive excess demand. Econometrica 28: 606–617.CrossRefGoogle Scholar
  12. Metzler, L. 1945. Stability of multiple markets: The Hicks conditions. Econometrica 13: 277–292.CrossRefGoogle Scholar
  13. Morishima, M. 1952. On the laws of change of price-system in an economy which contains complementary commodities. Osaka Economic Papers 1: 101–113.Google Scholar
  14. Morishima, M. 1964. Equilibrium, stability and growth. Oxford: Clarendon Press.Google Scholar
  15. Mosak, J.L. 1944. General equilibrium theory in international trade. Bloomington: Principia Press.Google Scholar
  16. Mukherji, A. 1972. On complementarity and stability. Journal of Economic Theory 4: 442–457.CrossRefGoogle Scholar
  17. Negishi, T. 1961. On the formation of prices. International Economic Review 2: 122–126.CrossRefGoogle Scholar
  18. Ohyama, M. 1972. On the stability of generalized Metzlerian systems. Review of Economic Studies 39: 193–204.CrossRefGoogle Scholar
  19. Rader, T. 1972. General equilibrium theory with complementary factors. Journal of Economic Theory 4: 372–380.CrossRefGoogle Scholar
  20. Uzawa, H. 1960. Walras’ tâtonnement in the theory of exchange. Review of Economic Studies 27: 182–194.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Lionel W. McKenzie
    • 1
  1. 1.