Re: [OPE-L] equilibrium and simultaneous vs. sequential determination

From: Ian Wright (wrighti@ACM.ORG)
Date: Wed Sep 19 2007 - 13:51:26 EDT 

Hi Fred

Sorry for the delay in replying. Although your equations are simple
you I do not yet see how they can be interpreted as equilibrium
prices.

Since the ki and Ki are given and have units of money then they
themselves must be functions of the PPi. So currently your equation
PPi =  ki +  rKi
does not say very much. I'd need to see the PPi's on the RHS too.

Given your suggestion that it is possible to combine equilibrium and
sequential determination feel free to time subscript the PPi on the
RHS; say something like:
PPi(t) = f(PPi(t-1)) + r g(PPi(t-1))
where f is the function that describes how cost prices ki are related
to prices of production, and g is the function that describes how
stock prices Ki are related to prices of production. I think it will
be easier however if we simplify and discard stocks and replace the Ki
with ki.

Then we can take the analysis further.

Thanks,
-Ian.

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