Walrasian Auction Theory

Walrasian Auction Theory describes how markets can reach an equilibrium where supply equals demand. It imagines a central auctioneer who periodically gathers all buyers and sellers' price and quantity offers. By adjusting prices based on these offers, the auctioneer finds a set of prices where the quantity people want to buy matches the quantity others want to sell. This process ensures resources are allocated efficiently, with no excess demand or supply. While theoretical, it provides a foundation for understanding how markets tend toward balance and stable prices through collective interactions.