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The evolution of exchange

  • Ben-Shoham, Assaf
  • Serrano, Roberto
  • Volij, Oscar

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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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 114 (2004)
Issue (Month): 2 (February)
Pages: 310-328

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Handle: RePEc:eee:jetheo:v:114:y:2004:i:2:p:310-328
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  1. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
  2. Allan M. Feldman, 1973. "Bilateral Trading Processes, Pairwise Optimally, and Pareto Optimality," Review of Economic Studies, Oxford University Press, vol. 40(4), pages 463-473.
  3. James Bergin & B. L. Lipman, 1994. "Evolution with state-dependent mutations," Working Papers 199411, School of Economics, University College Dublin.
  4. Sergiu Hart, 1999. "Evolutionary Dynamics and Backward Induction," Game Theory and Information 9905002, EconWPA, revised 23 Mar 2000.
  5. Young H. P., 1993. "An Evolutionary Model of Bargaining," Journal of Economic Theory, Elsevier, vol. 59(1), pages 145-168, February.
  6. Shapley, Lloyd & Scarf, Herbert, 1974. "On cores and indivisibility," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 23-37, March.
  7. Noeldecke,Georg & Samuelson,Larry, . "An evolutionary analysis of backward and forward induction," Discussion Paper Serie B 228, University of Bonn, Germany.
  8. 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.
  9. Goldman, Steven M & Starr, Ross M, 1982. "Pairwise, t-Wise, and Pareto Optimalities," Econometrica, Econometric Society, vol. 50(3), pages 593-606, May.
  10. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
  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. 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.
  13. D. Foster & P. Young, 2010. "Stochastic Evolutionary Game Dynamics," Levine's Working Paper Archive 493, David K. Levine.
  14. P. Young, 1999. "The Evolution of Conventions," Levine's Working Paper Archive 485, David K. Levine.
  15. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September.
  16. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
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