Ambiguities in the Sign of Excess Effective Demand by Firms

Abstract

Can we state that at a given Benassy Fixprice Allocation z * there is, say, excess effective demand for a commodity? It turns out that in productive economies there may be ambiguities in the sign of excess effective demand: different effective demand vectors with different signs, may be compatible with z *. We prove: (a) no ambiguity exists if intermediate goods are ruled out and if all firms in the long side of a market perceive binding constraints; (b) in any case one can always select a vector of effective demands yielding minimal sets of buyer's and seller's markets.