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General Equilibrium and the Emergence of (Non) Market Clearing Trading Institutions

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  • Alos-Ferrer, Carlos
  • Kirchsteiger, Georg

Abstract

We consider a pure exchange economy, where for each good several trading institutions are available, only one of which is market-clearing. The other feasible trading institutions lead to rationing. To learn on which trading institutions to coordinate, traders follow behavioural rules of thumb that are based on the past performances of the trading institutions. Given the choice of institutions, market outcomes are determined by an equilibrium concept that allows for rationing. We find that full coordination on the market-clearing institutions without any rationing is a stochastically stable outcome, independently of the characteristics of the alternative available institutions. We also find, though, that coordination on other, non-market-clearing institutions with rationing can be stochastically stable.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5795.

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Date of creation: Sep 2006
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Handle: RePEc:cpr:ceprdp:5795

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Keywords: evolution of trading platforms; general equilibrium; learning; market institutions; rationing;

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  1. Mas-Colell, Andreu & Nachbar, John H., 1991. "On the finiteness of the number of critical equilibria, with an application to random selections," Journal of Mathematical Economics, Elsevier, vol. 20(4), pages 397-409.
  2. Carlos Alós-Ferrer & Ana Ania, 2005. "The evolutionary stability of perfectly competitive behavior," Economic Theory, Springer, vol. 26(3), pages 497-516, October.
  3. Ellison, Glenn, 2000. "Basins of Attraction, Long-Run Stochastic Stability, and the Speed of Step-by-Step Evolution," Review of Economic Studies, Wiley Blackwell, vol. 67(1), pages 17-45, January.
  4. Carlos Alós-Ferrer, 2000. "Finite Population Dynamics and Mixed Equilibria," Vienna Economics Papers 0008, University of Vienna, Department of Economics.
  5. Dreze, Jacques H, 1975. "Existence of an Exchange Equilibrium under Price Rigidities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 301-20, June.
  6. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
  7. Kirchsteiger,Georg & Alós-Ferrer,Carlos, 2003. "Does Learning Lead to Coordination on Market Clearing Institutions?," Research Memorandum 053, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  8. Plott, Charles R, 1982. "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1485-1527, December.
  9. Postlewaite, Andrew, 1979. "Manipulation via Endowments," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 255-62, April.
  10. Alós-Ferrer, Carlos & Netzer, Nick, 2010. "The logit-response dynamics," Games and Economic Behavior, Elsevier, vol. 68(2), pages 413-427, March.
  11. Faias, Marta & Moreno-Garcia, Emma & Pascoa, Mario Rui, 2002. "Real indeterminacy of equilibria and manipulability," Journal of Mathematical Economics, Elsevier, vol. 37(4), pages 325-340, July.
  12. Stahn, Hubert, 1999. "Monopolistic behaviors and general equilibrium: a generalization of Nikaido's work," Journal of Mathematical Economics, Elsevier, vol. 32(1), pages 87-112, August.
  13. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
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Cited by:
  1. repec:hal:cesptp:halshs-00634656 is not listed on IDEAS
  2. Mandel Antoine & Botta Nicola, 2009. "A Note on Herbert Gintis' "Emergence of a Price System from Decentralized Bilateral Exchange"," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-18, December.

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