The hahn process with quantity constraints

Abstract

We define a non-tatonnement process for an exchange economy in which agents perceive quantity constraints, which are determined by kinks in their conjectural demand curves. In the course of the process nonbinding constraints may be arbitrarily relaxed or tightened. Binding constraints may also be arbitrarily tightened, and may be relaxed, due to price changes, along the corresponding conjectural demand curves. Quasi-stability is proved under a standard Hahn Process assumption, but the limit points of the process cannot be conjectural equilibria, although they may be quantity-constrained equilibria.