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Stochastic stability in the Scarf economy

  • Antoine Mandel

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Herbert Gintis

    (Santa Fe Institute - Santa Fe Institute, Central European University - CEU - Central European University)

We present a mathematical model for the analysis of the bargaining games based on private prices used by Gintis to simulate the dynamics of prices in exchange economies, see [Gintis 2007]. We then characterize, in the Scarf economy, a class of dynamics for which the Walrasian equilibrium is the only stochastically stable state. Hence, we provide dynamic foundations for general equilibrium for one of the best-known example of instability of the tâtonement process.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00748328.

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Date of creation: Oct 2012
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Handle: RePEc:hal:cesptp:halshs-00748328
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  1. Fudenberg, D. & Harris, C., 1992. "Evolutionary dynamics with aggregate shocks," Journal of Economic Theory, Elsevier, vol. 57(2), pages 420-441, August.
  2. Ellison, Glenn, 2000. "Basins of Attraction, Long-Run Stochastic Stability, and the Speed of Step-by-Step Evolution," Review of Economic Studies, Wiley Blackwell, vol. 67(1), pages 17-45, January.
  3. Herings, P.J.J., 1994. "A globally and universally stable price adjustment process," Discussion Paper 1994-52, Tilburg University, Center for Economic Research.
  4. Schecter, Stephen, 1977. "Accessibility of optima in pure exchange economies," Journal of Mathematical Economics, Elsevier, vol. 4(3), pages 197-216, December.
  5. Herbert Gintis, 2007. "The Dynamics of General Equilibrium," Economic Journal, Royal Economic Society, vol. 117(523), pages 1280-1309, October.
  6. Sonnenschein, Hugo, 1973. "Do Walras' identity and continuity characterize the class of community excess demand functions?," Journal of Economic Theory, Elsevier, vol. 6(4), pages 345-354, August.
  7. Bottazzi, Jean-Marc, 1994. "Accessibility of Pareto optima by Walrasian exchange processes," Journal of Mathematical Economics, Elsevier, vol. 23(6), pages 585-603, November.
  8. Antoine Mandel & Nicola Botta, 2009. "A note on Herbert Gintis' "Emergence of a Price System from Decentralized Bilateral Exchange"," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00634656, HAL.
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