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The exact law of large numbers for independent random matching

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  • Duffie, Darrell
  • Sun, Yeneng

Abstract

This paper provides a mathematical foundation for independent random matching of a large population, as widely used in the economics literature. We consider both static and dynamic systems with random mutation, partial matching arising from search, and type changes induced by matching. Under independence assumptions at each randomization step, we show that there is an almost-sure constant cross-sectional distribution of types in a large population, and moreover that the multi-period cross-sectional distribution of types is deterministic and evolves according to the transition matrices of the type process of a given agent. We also show the existence of a joint agent-probability space, and randomized mutation, partial matching and match-induced type-changing functions that satisfy appropriate independence conditions, where the agent space is an extension of the classical Lebesgue unit interval.

Suggested Citation

  • Duffie, Darrell & Sun, Yeneng, 2012. "The exact law of large numbers for independent random matching," Journal of Economic Theory, Elsevier, vol. 147(3), pages 1105-1139.
  • Handle: RePEc:eee:jetheo:v:147:y:2012:i:3:p:1105-1139
    DOI: 10.1016/j.jet.2012.01.003
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    More about this item

    Keywords

    Independent random matching; Search; Exact law of large numbers; Population dynamics; Random mutation;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E00 - Macroeconomics and Monetary Economics - - General - - - General

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