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The exact law of large numbers for independent random matching

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  • Duffie, Darrell
  • Sun, Yeneng

Abstract

This paper provides a mathematical foundation for independent random matching of a large population, as widely used in the economics literature. We consider both static and dynamic systems with random mutation, partial matching arising from search, and type changes induced by matching. Under independence assumptions at each randomization step, we show that there is an almost-sure constant cross-sectional distribution of types in a large population, and moreover that the multi-period cross-sectional distribution of types is deterministic and evolves according to the transition matrices of the type process of a given agent. We also show the existence of a joint agent-probability space, and randomized mutation, partial matching and match-induced type-changing functions that satisfy appropriate independence conditions, where the agent space is an extension of the classical Lebesgue unit interval.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 147 (2012)
Issue (Month): 3 ()
Pages: 1105-1139

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Handle: RePEc:eee:jetheo:v:147:y:2012:i:3:p:1105-1139

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Independent random matching; Search; Exact law of large numbers; Population dynamics; Random mutation;

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Cited by:
  1. Alain B\'elanger & Gaston Giroux, 2012. "Information Percolation: Some General Cases with an Application to Econophysics," Papers 1202.5251, arXiv.org.
  2. Karavaev, Andrei, 2008. "A Theory of Continuum Economies with Idiosyncratic Shocks and Random Matchings," MPRA Paper 7445, University Library of Munich, Germany.

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