Dynamic recontracting processes with multiple indivisible goods

Olivier Bochet (), Bettina Klaus () and Markus Walzl

No 2007061, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We consider multiple-type housing markets. To capture the dynamic aspect of trade in such markets, we study a dynamic recontracting process similar to the one introduced by Serrano and Volij (2005). First, we analyze the set of recurrent classes of this process as a (non-empty) solution concept. We show that each core allocation always constitutes a singleton recurrent class and provide examples of non-singleton recurrent classes consisting of blocking-cycles of individually rational allocations. For multiple-type housing markets stochastic stability never serves as a selection device among recurrent classes.Next, we propose a method to compute the limit invariant distribution of the dynamic recontracting process. The limit invariant distribution exploits the interplay of coalitional stability and accessibility that determines a probability distribution over final allocations. We provide various examples to demonstrate how the limit invariant distribution discriminates among stochastically stable allocations: surprisingly, some core allocations are less likely to be final allocations of the dynamic process than cycles composed of non-core allocations.

Keywords: core; indivisible goods; limit invariant distribution; stochastic stability (search for similar items in EconPapers)
JEL-codes: D63 D70 (search for similar items in EconPapers)
Date: 2007-08-01
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Citations: View citations in EconPapers (3)

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Working Paper: Dynamic recontracting processes with multiple indivisible goods (2007)
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