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Reaching Market Equilibrium Merely by Bilateral Barters

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  • Sjur Didrik Flåm
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    Abstract

    Motivated by emission and resource markets, this paper considers repeated, bilateral barters between owners of commodity bundles, contingent claims, or property rights. Focus is on feasible, voluntary exchanges, driven only by differences in substitution rates. No coordination is ever needed. The modelling complies with adaptive learning, behavioral economics, and decentralized decision-making. Presuming transferable utility, the paper provides sufficient conditions for convergence to market equilibrium. It is expedient that some parties have differentiable objectives or make strictly feasible choices.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-12/cesifo1_wp4504.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4504.

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    Date of creation: 2013
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    Handle: RePEc:ces:ceswps:_4504

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    Keywords: bilateral exchange; market equilibrium; transferable utility; common price; supergradients; stability; convergence;

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    1. Ghosal, Sayantan & Morelli, Massimo, 2004. "Retrading in market games," Journal of Economic Theory, Elsevier, Elsevier, vol. 115(1), pages 151-181, March.
    2. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262650401, December.
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    7. Flåm, Sjur Didrik & Koutsougeras, L., 2007. "Private Information, Transferable Utility, and the Core," Working Papers in Economics, University of Bergen, Department of Economics 04/07, University of Bergen, Department of Economics.
    8. Wilhite, Allen, 2001. "Bilateral Trade and 'Small-World' Networks," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 18(1), pages 49-64, August.
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    13. Flåm, Sjur Didrik & Gramstad, Kjetil, 2012. "Direct Exchange in Linear Economies," Working Papers in Economics, University of Bergen, Department of Economics 05/12, University of Bergen, Department of Economics.
    14. Gintis Herbert, 2006. "The Emergence of a Price System from Decentralized Bilateral Exchange," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 6(1), pages 1-15, December.
    15. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(5), pages 937-68, October.
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    17. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, American Economic Association, vol. 72(5), pages 923-55, December.
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    23. Didrik Flåm, Sjur, 2012. "Coupled projects, core imputations, and the CAPM," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 170-176.
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