A Note on Reswitching and Intertemporal Prices

CSWP 5 (August 2014)

Author Saverio M. Fratini

Keywords reswitching, stationary prices, intertemporal prices, convex sets

JEL B51, D21, D46

Bliss (1975) claims that reswitching is nothing but an ‘optical illusion’ due to the
exclusion of non‐stationary price sequences from the analysis. The present paper
is aimed at developing this point. The standard case for choice of techniques and
reswitching is reformulated in terms of Arrow‐Debreu intertemporal prices and
the conditions making these prices stationary are highlighted separately. It is then
shown that the analysis of the choice of techniques in terms of ‘switch points’
requires the stationary conditions.

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