The Le Chatelier Principle can be Expected to Hold Globally: Implications of Rationality in Constrained and Unconstrained Situations

Journal article

Although conditions that exhaust the implications of rationality (homogeneity, symmetry, definiteness) are well known, these apply under a single set of constraints. If a situation can be compared with another situation were extra constraints are imposed, there are stronger implications. One example is the (local) Le Chatelier Principle. A global Le Chatelier Principle does not always hold, and cannot always hold; but a global Le Chatelier Principle in Expectation applies with weak conditions on the density underlying the expectation. This Principle is implied by and exhausts the implication of rationality. An application of this result is that aggregate supply mauy satisfy a Global Le Chatelier Principle though it is never always satisfied by an individual supply function.

Authors: Roberts, K

• Journal: Journal of Economic Theory
• Volume: 87
• Publication date: 1999-01-01
• Language: English