Market sentiments and convergence dynamics in decentralized assignment economies

Bary Pradelski () and Heinrich Nax
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Bary Pradelski: POLARIS - Performance analysis and optimization of LARge Infrastructures and Systems - Centre Inria de l'Université Grenoble 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 Nax: ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]

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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.

Keywords: assignment games; core; evolutionary game theory; matching markets; convergence time; market psychology (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-cwa, nep-des, nep-gth and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-03100116v1
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Published in International Journal of Game Theory, 2020, 49 (1), pp.275-298. ⟨10.1007/s00182-019-00694-0⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03100116

DOI: 10.1007/s00182-019-00694-0

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