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The Complexity of Exchange

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  • Robert Axtell

Abstract

The computational complexity of two classes of market mechanisms is compared. First the Walrasian interpretation in which prices are centrally computed by an auctioneer. Recent results on the "computational complexity" are reviewed. The "non"-"polynomial complexity" of these algorithms makes Walrasian general equilibrium an "implausible" conception. Second, a "decentralised" picture of market processes is described, involving concurrent exchange within transient coalitions of agents. These processes feature "price dispersion", yield allocations that are "not in the core", modify the "distribution of wealth", are always "stable", but "path"-"dependent." Replacing the Walrasian framing of markets requires substantial revision of conventional wisdom concerning markets. Copyright 2005 Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 115 (2005)
Issue (Month): 504 (06)
Pages: F193-F210

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Handle: RePEc:ecj:econjl:v:115:y:2005:i:504:p:f193-f210

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Cited by:
  1. Ennio Bilancini & Fabio Petri, 2008. "The Dynamics of General Equilibrium: A Comment on Professor Gintis," Department of Economics University of Siena 538, Department of Economics, University of Siena.
  2. Kirman, Alan & Markose, Sheri & Giansante, Simone & Pin, Paolo, 2007. "Marginal contribution, reciprocity and equity in segregated groups: Bounded rationality and self-organization in social networks," Journal of Economic Dynamics and Control, Elsevier, vol. 31(6), pages 2085-2107, June.
  3. Paola Tubaro, 2009. "Agent-based Computational Economics: a Methodological Appraisal," EconomiX Working Papers 2009-42, University of Paris West - Nanterre la Défense, EconomiX.
  4. Schnizler, Björn & Neumann, Dirk & Veit, Daniel & Napoletano, Mauro & Catalano, Michele & Gallegati, Mauro & Reinicke, Michael & Streitberger, Werner & Eymann, Torsten, 2005. "Environmental analysis for application layer networks," Bayreuth Reports on Information Systems Management 1, University of Bayreuth, Chair of Information Systems Management.
  5. van der Hoog, Sander, 2008. "On the disequilibrium dynamics of sequential monetary economies," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 525-552, December.
  6. Ghosal, Sayantan & Porter, James, 2010. "Out of Equilibrium Dynamics with Decentralized Exchange Cautious Trading and Convergence to Efficiency," The Warwick Economics Research Paper Series (TWERPS) 928, University of Warwick, Department of Economics.
  7. K. Vela Velupillai, 2007. "Variations on the Theme of Conning in Mathematical Economics," Department of Economics Working Papers 0703, Department of Economics, University of Trento, Italia.
  8. Dan Ladley & Seth Bullock, 2008. "The Strategic Exploitation of Limited Information and Opportunity in Networked Markets," Computational Economics, Society for Computational Economics, vol. 32(3), pages 295-315, October.
  9. Edoardo Gaffeo & Mauro Gallegati & Umberto Gostoli, 2012. "An agent-based "proof of principle" for Walrasian macroeconomic theory," CEEL Working Papers 1202, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  10. Koppl, Roger, 2010. "Some epistemological implications of economic complexity," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 859-872, December.
  11. repec:ebl:ecbull:v:2:y:2008:i:3:p:1-7 is not listed on IDEAS

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