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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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References

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  1. Sergiu Hart, 1999. "Evolutionary Dynamics and Backward Induction," Game Theory and Information 9905002, EconWPA, revised 23 Mar 2000.
  2. J. Bergin & B. Lipman, 2010. "Evolution with State-Dependent Mutations," Levine's Working Paper Archive 486, David K. Levine.
  3. 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.
  4. Noeldecke,Georg & Samuelson,Larry, . "An evolutionary analysis of backward and forward induction," Discussion Paper Serie B 228, University of Bonn, Germany.
  5. Fernando Vega Redondo, 1996. "The evolution of walrasian behavior," Working Papers. Serie AD 1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  6. Shapley, Lloyd & Scarf, Herbert, 1974. "On cores and indivisibility," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 23-37, March.
  7. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  8. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September.
  9. 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.
  10. Kandori, M. & Mailath, G.J., 1991. "Learning, Mutation, And Long Run Equilibria In Games," Papers 71, Princeton, Woodrow Wilson School - John M. Olin Program.
  11. D. Foster & P. Young, 2010. "Stochastic Evolutionary Game Dynamics," Levine's Working Paper Archive 493, David K. Levine.
  12. Goldman, Steven M & Starr, Ross M, 1982. "Pairwise, t-Wise, and Pareto Optimalities," Econometrica, Econometric Society, vol. 50(3), pages 593-606, May.
  13. 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.
  14. 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.
  15. P. Young, 1999. "The Evolution of Conventions," Levine's Working Paper Archive 485, David K. Levine.
  16. Young H. P., 1993. "An Evolutionary Model of Bargaining," Journal of Economic Theory, Elsevier, vol. 59(1), pages 145-168, February.
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Cited by:
  1. 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.
  2. Roberto Serrano & Oscar Volij, 2003. "MISTAKE IN COOPERATION:the Stochastic Stability of Edgeworth's Recontracting," Working Papers 2003-23, Brown University, Department of Economics.
  3. KANDORI, Michihiro & Roberto Serrano & Oscar Volij, . "Decentralized Trade, Random Utility and the Evolution of Social Welfare," Economic theory and game theory 021, Oscar Volij.
  4. Leonardo Boncinelli, 2007. "Global vs. Local Information," Department of Economics University of Siena 520, Department of Economics, University of Siena.
  5. Roberto Serrano & Roland Pongou, 2009. "A Dynamic Theory Of Fidelity Networks With An Application To The Spread Of Hiv/Aids," Working Papers wp2009_0909, CEMFI.
  6. Oscar Volij, 1998. "In Defense of DEFECT or Cooperation does not Justify the Solution Concept," Economic theory and game theory 007, Oscar Volij, revised 26 Aug 1999.
  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. Boncinelli, Leonardo & Pin, Paolo, 2012. "Stochastic stability in best shot network games," Games and Economic Behavior, Elsevier, vol. 75(2), pages 538-554.
  9. 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.

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