Asymmetric “Min” Condition and Estimation for Disequilibrium Markets in Centrally Planned Economies

Based on the institutional arrangements and enterprise behavior in centrally planned economies (CPEs), we argued that the disequilibrium state in the goods market in CPEs can be characterized by an asymmetric “min” condition. The condition provides new directions in disequilibrium modeling and empirical testing for CPEs. The advantages of the models developed from the asymmetric “min” condition are computational simplification and robustness with respect to data errors, as compared with the canonical model. In the paper we also provide an application of the theory to the Chinese economy. The results are quite consistent with the general observations.