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Learning competitive equilibrium

  • Crockett, Sean
  • Spear, Stephen
  • Sunder, Shyam

We consider a pure exchange economy repeated from a fixed endowment for an indefinite number of periods and posit a learning rule which directs convergence to competitive equilibrium. In each period trade converges to an allocation in the contract set, where agents interpret the current (common) normalized utility gradient as a vector of prices to determine the implied wealth redistribution relative to their endowments. Agents who are less wealthy at the new allocation are designated subsidizers, and demand to provide smaller subsidies in subsequent periods of economic activity. Our model is a globally stable alternative to Walras' tâtonnement.

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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 44 (2008)
Issue (Month): 7-8 (July)
Pages: 651-671

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Handle: RePEc:eee:mateco:v:44:y:2008:i:7-8:p:651-671
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  1. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 322.
  2. 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.
  3. Smale, S., 1974. "Global analysis and economics III : Pareto Optima and price equilibria," Journal of Mathematical Economics, Elsevier, vol. 1(2), pages 107-117, August.
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  5. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
  6. Arlington W. Williams & John O. Ledyard & Steven Gjerstad & Vernon L. Smith, 2000. "Concurrent trading in two experimental markets with demand interdependence," Economic Theory, Springer, vol. 16(3), pages 511-528.
  7. Sean Crockett, 2008. "Learning competitive equilibrium in laboratory exchange economies," Economic Theory, Springer, vol. 34(1), pages 157-180, January.
  8. Hurwicz, Leonid & Radner, Roy & Reiter, Stanley, 1975. "A Stochastic Decentralized Resource Allocation Process: Part I," Econometrica, Econometric Society, vol. 43(2), pages 187-221, March.
  9. Hirota, Masayoshi, 1981. "On the Stability of Competitive Equilibrium and the Patterns of Initial Holdings: An Example," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 461-67, June.
  10. Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 119-37, February.
  11. Noussair, Charles N & Plott, Charles R & Riezman, Raymond G, 1995. "An Experimental Investigation of the Patterns of International Trade," American Economic Review, American Economic Association, vol. 85(3), pages 462-91, June.
  12. Anderson, Christopher M. & Granat, Sander & Plott, Charles R. & Shimomura, Ken-Ichi, 2000. "Global Instability in Experimental General Equilibrium: The Scarf Example," Working Papers 1086, California Institute of Technology, Division of the Humanities and Social Sciences.
  13. Kirman, Alan, 1989. "The Intrinsic Limits of Modern Economic Theory: The Emperor Has No Clothes," Economic Journal, Royal Economic Society, vol. 99(395), pages 126-39, Supplemen.
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