On the instability of competitive equilibrium: a further example

It is shown that a Walrasian price adjustment process fails to converge to an equilibrium in an exchange economy with three consumers and three commodities, where each consumer has a quasilinear utility function, desires only two commodities, and demands positive amounts of both commodities. The instability is due to weak substitution effects in addition to asymmetrical income effects.Exchange economy, Instability, Quasilinear utility