Walrasian Allocations without Price-Taking Behavior
AbstractConsider an exchange economy where agents are arbitragers, in that they try to upset allocations imagining plausible beneficial trades. With an introspective algorithm, each agent constructs an interactive choice set (ICS), i.e., a set of bundles that he considers achievable through a sequence of plausible trades with other agents. We show that Walrasian allocations can be characterized as those where each agent chooses optimally from his ICS, which is always contained in a budget set (with differentiability, both sets coincide). Our analysis provides a different behavioral assumption underlying Walrasian allocations, offers an explanation for the source of competitive prices, and connects with the core convergence theorem.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 95 (2000)
Issue (Month): 1 (November)
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Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- Volij, Oscar & Serrano, Roberto, 2000. "Walrasian Allocations Without Price-Taking Behavior," Staff General Research Papers 5168, Iowa State University, Department of Economics.
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