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The Evolution of Exchange

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  • Oscar Volij

    (Hebrew University of Jerusalem)

Abstract

The aim of the paper is to introduce the modern techniques of evolutionary game theory introduced into economics by Young (1993) and others to analyze exchange economies. We define a dynamic matching process on the simple housing problem introduced by Shapley and Scarf (1974) and analyze the stochastic stability of its allocations. Our main findings are: 1. All the efficient allocations are stochastically stable. 2. In three-person economies, all the stochastically stable allocations are efficient. 3. An example of a four-agent economy where an inefficient allocation is stochastically stable.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0292.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0292

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  1. P. Young, 1999. "The Evolution of Conventions," Levine's Working Paper Archive 485, David K. Levine.
  2. Jackson, Matthew O. & Watts, Alison, 2002. "On the formation of interaction networks in social coordination games," Games and Economic Behavior, Elsevier, vol. 41(2), pages 265-291, November.
  3. Bogomolnaia, Anna & Moulin, Herve, 2001. "A New Solution to the Random Assignment Problem," Journal of Economic Theory, Elsevier, vol. 100(2), pages 295-328, October.
  4. D. Foster & P. Young, 2010. "Stochastic Evolutionary Game Dynamics," Levine's Working Paper Archive 493, David K. Levine.
  5. Kandori, M. & Mailath, G.J., 1991. "Learning, Mutation, And Long Run Equilibria In Games," Papers 71, Princeton, Woodrow Wilson School - John M. Olin Program.
  6. G. Noldeke & L. Samuelson, 2010. "An Evolutionary Analysis of Backward and Forward Induction," Levine's Working Paper Archive 538, David K. Levine.
  7. Sergiu Hart, 1999. "Evolutionary Dynamics and Backward Induction," Game Theory and Information 9905002, EconWPA, revised 23 Mar 2000.
  8. J Bergin & B L Lipman, 1997. "Evolution with state-dependent Mutations," Levine's Working Paper Archive 771, David K. Levine.
  9. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September.
  10. Fernando Vega Redondo, 1996. "The evolution of walrasian behavior," Working Papers. Serie AD 1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  11. Atila Abdulkadiroglu & Tayfun Sonmez, 1998. "Random Serial Dictatorship and the Core from Random Endowments in House Allocation Problems," Econometrica, Econometric Society, vol. 66(3), pages 689-702, May.
  12. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  13. Young H. P., 1993. "An Evolutionary Model of Bargaining," Journal of Economic Theory, Elsevier, vol. 59(1), pages 145-168, February.
  14. Feldman, Allan M, 1973. "Bilateral Trading, Processes, Pairwise Optimality, and Pareto Optimality," Review of Economic Studies, Wiley Blackwell, vol. 40(4), pages 463-73, October.
  15. Goldman, Steven M & Starr, Ross M, 1982. "Pairwise, t-Wise, and Pareto Optimalities," Econometrica, Econometric Society, vol. 50(3), pages 593-606, May.
  16. Shapley, Lloyd & Scarf, Herbert, 1974. "On cores and indivisibility," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 23-37, March.
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Cited by:
  1. Oscar Volij, 1999. "In Defense or Defect or Cooperation Does not Justify the Solution Concept," Working Papers 99-26, Brown University, Department of Economics.
  2. Kevin Hasker, 2014. "The Emergent Seed: A Representation Theorem for Models of Stochastic Evolution and two formulas for Waiting Time," Levine's Working Paper Archive 786969000000000954, David K. Levine.
  3. Ghosal, Sayantan & Porter, James, 2013. "Decentralised exchange, out-of-equilibrium dynamics and convergence to efficiency," Mathematical Social Sciences, Elsevier, vol. 66(1), pages 1-21.
  4. Roberto Serrano & Oscar Volij, 2008. "Mistakes in Cooperation: the Stochastic Stability of Edgeworth's Recontracting," Economic Journal, Royal Economic Society, vol. 118(532), pages 1719-1741, October.
  5. Roland Pongou & Roberto Serrano, 2009. "A dynamic theory of fidelity networks with an application to the spread of HIV/AIDS," Working Papers 2009-03, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  6. Ioannou, Christos A., 2013. "Coevolution of finite automata with errors," Discussion Paper Series In Economics And Econometrics 1019, Economics Division, School of Social Sciences, University of Southampton.
  7. Chongmin Kim & Kam-Chau Wong, 2011. "Evolution of Walrasian equilibrium in an exchange economy," Journal of Evolutionary Economics, Springer, vol. 21(4), pages 619-647, October.
  8. Michihiro Kandori & Roberto Serrano & Oscar Volij, 2005. "Decentralized Trade, Random Utility And The Evolution Of Social Welfare," Economics Working Papers we056433, Universidad Carlos III, Departamento de Economía.
  9. Boncinelli, Leonardo & Pin, Paolo, 2012. "Stochastic stability in best shot network games," Games and Economic Behavior, Elsevier, vol. 75(2), pages 538-554.
  10. Leonardo Boncinelli, 2007. "Global vs. Local Information," Department of Economics University of Siena 520, Department of Economics, University of Siena.

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