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Market sentiments and convergence dynamics in decentralized assignment economies

Author

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  • Bary S R Pradelski

    (POLARIS - Performance analysis and optimization of LARge Infrastructures and Systems - Inria Grenoble - Rhône-Alpes - Inria - Institut National de Recherche en Informatique et en Automatique - LIG - Laboratoire d'Informatique de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes)

  • Heinrich H Nax

    (ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich])

Abstract

In two-sided markets with transferable utility ('assignment games'), we study the dynamics of trade arrangements and price adjustments as agents from the two market sides stochastically match, break up, and re-match in their pursuit of better opportunities. The underlying model of individual adjustments is based on the behavioral theories of adaptive learning and aspiration adjustment. Dynamics induced by this model converge to approximately optimal and stable market outcomes, but this convergence may be (exponentially) slow. We introduce the notion of a 'market sentiment' that governs which of the two market sides is temporarily more or less amenable to price adjustments, and show that such a feature may significantly speed up convergence.

Suggested Citation

  • Bary S R Pradelski & Heinrich H Nax, 2020. "Market sentiments and convergence dynamics in decentralized assignment economies," Post-Print hal-03100116, HAL.
    • Handle: RePEc:hal:journl:hal-03100116
    DOI: 10.1007/s00182-019-00694-0
    Note: View the original document on HAL open archive server: https://hal.science/hal-03100116
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    Cited by:

    1. Jacob D Leshno & Bary S R Pradelski, 2021. "The importance of memory for price discovery in decentralized markets," Post-Print hal-03100097, HAL.
    2. Leshno, Jacob D. & Pradelski, Bary S.R., 2021. "The importance of memory for price discovery in decentralized markets," Games and Economic Behavior, Elsevier, vol. 125(C), pages 62-78.

    More about this item

    Keywords

    assignment games; core; evolutionary game theory; matching markets; convergence time; market psychology;
    All these keywords.

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