Out-of-equilibrium dynamics and excess volatility in firm networks

We study the conditions under which input-output networks can dynamically attain a competitive equilibrium, where markets clear and profits are zero. endow classical firm network model with minimal dynamical rules that reduce supply/demand imbalances excess profits. show time needed to reach equilibrium diverges infinity as system approaches an instability point beyond Hawkins-Simons condition is violated no longer admissible. argue such slow dynamics source of volatility, through accumulation amplification exogenous shocks. Factoring in essential physical constraints absent our model, causality or inventory management, we then propose consistent displays rich variety phenomena. Competitive only be reached after some within restricted region parameter space, outside one observes spontaneous periodic chaotic dynamics, reminiscent real business cycles. This suggests alternative explanation volatility terms purely endogenous fluctuations. Diminishing return scale increased perishability goods found ease convergence towards equilibrium.