Are there any models which calculate the time (i.e. minutes, hours, days ect.) it takes for equilibrium to occur? I.e how long it takes for market forces to settle.
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2$\begingroup$ Given that you have tagged this general equilibrium, are you asking about a case where initially there is equilibrium in all markets, then there is a single disturbance or shock, and then with no further disturbance the economy settles to a new equilibrium? If so this seems extremely hypothetical as disturbances somewhere in an economy will be frequent. The scenario of settling to equilibrium seems more applicable to a single market. $\endgroup$– Adam BaileyCommented Jul 27, 2017 at 10:20
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$\begingroup$ @AdamBailey My question is more focused on a single market. Changing tag now. $\endgroup$– EconJohn ♦Commented Jul 27, 2017 at 16:18
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1 Answer
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There is the famous Cobweb model. Starting from a situation of equilibrium, it analyses the effect of a shock, and how long it takes to reach the equilibrium, which depends entirely on the elasticities (or slopes) of demand and supply. Thus, by estimating empirically such elasticities for a given period (e.g. year), you can predict/forecast how many periods (e.g. years) it will take the market to settle after a shock. (Strictly speaking, it is infinity, but you just need to select a threshold or margin of error to consider the market in equilibrium)
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A huge literature exploded after the original paper, so if you google Cobweb models you get tons of hits. A very good treatment of this model can be found in Waugh (1964). He extends the simple model to multiple markets.
answered Jul 28, 2017 at 6:48
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1$\begingroup$ Gif seems to stop after a while or its just me? $\endgroup$ Commented Jul 28, 2017 at 6:58