Even in simple economic systems, equilibrium can be non-unique: an example

According to economics, prices are determined by the relationship between supply and demand: They correspond to the equilibrium in which supply is exactly equal to the demand, i.e., for which the optimal amount that the seller is willing to sell at this price is exactly equal to the optimal amount that the buyer is willing to pay. In many situations, the corresponding prices are indeed uniquely determined by the supply–demand relation. From the purely mathematical viewpoint, there are situations when the equilibrium is not unique, but most economists believe that in practical situations, equilibrium prices are usually uniquely determined. In this paper, we provide a simple but realistic example in which the equilibrium is not unique.