An ABM-Evolutionary Approach: Bilateral Exchanges, Bargaining and Walrasian Equilibria

Summary This paper analyzes, via intensive use of simulation techniques, the effects of the introduction of direct exchange relationships through bilateral trades in a simple general equilibrium pure exchange economy. Agents are heterogeneous in their endowments and repeatedly match in random pairs bargaining on how to split the advantages of a trade; possibly they can agree to exchange at the known market clearing prices. Simulations of this evolutionary process show that while walrasian outcomes emerge in the interaction among people with similar outside opportunities, people of different groups converge to accept an equilibrium in which agents with the best outside opportunity extract the greater part of the surplus out of an exchange. On other hand the acceptance of market mediation (i.e. walrasian outcomes) is more probable when either the parties try to exploit too much from the opponent or when there is anonymity in the trading process. The results show evidence that the acceptance of decentralized, personalized contracting (apart from efficiency considerations) increases the probability of amplifying the asymmetries in the initial distribution beyond what is produced by the pure market mechanism.