An Iterative Tâtonnement Process

A discrete time tâtonnement process is presented for reaching an equilibrium of an exchange economy. The process is based on updating the prices in proportion to excess demands of the commodities such that the new prices are positive and their changes are bounded. Global convergence conditions for the process are given and convergence is shown when the excess demand function has the gross substitute property and curves appropriately around the equilibrium. Furthermore, this paper introduces a new, second order, form of the weak axiom of revealed preferences; a condition which also implies convergence. It is shown that this condition holds when the excess demand function is strongly monotone.