Mistakes in Cooperation: the Stochastic Stability of Edgeworth's Recontracting

Roberto Serrano () and Oscar Volij ()
Additional contact information
Oscar Volij: Department of Economics, Iowa State University

No 29, Economics Working Papers from Institute for Advanced Study, School of Social Science

Abstract: In an exchange economy with a finite number of indivisible goods, we analyze a dynamic trading process of coalitional recontracting where agents may make mistakes with small probability. We show first that the recurrent classes of the unperturbed (mistake free) process consist of (i) all core allocations as absorbing states, and (ii) cycles of non-core allocations. Next, we introduce a perturbed process, where the resistance of each transition is a function of the number of agents that make mistakes-–do not improve–-in the transition and of the seriousness of each mistake. If preferences are always strict, we show that the unique stochastically stable state of the perturbed process is the Walrasian allocation. In economies with indifferences, non-core cycles are sometimes stochastically stable, while some core allocations are not.

Keywords: Stochastic Stability; Exchange Economies; Assignment Problems; Core; Walrasian Equilibrium (search for similar items in EconPapers)
JEL-codes: C7 D51 D61 D63 (search for similar items in EconPapers)
Date: 2003-01
View list of references View citations in EconPapers

Downloads: (external link)
http://www.sss.ias.edu/publications/papers/econpaper29.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: MISTAKES IN COOPERATION: THE STOCHASTIC STABILITY OF EDGEWORTH'S RECONTRACTING (2005)
Working Paper: MISTAKE IN COOPERATION:the Stochastic Stability of Edgeworth's Recontracting (2003)
Journal Article: Mistakes in Cooperation: the Stochastic Stability of Edgeworth's Recontracting (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ads:wpaper:0029

Access Statistics for this paper

More papers in Economics Working Papers from Institute for Advanced Study, School of Social Science
Contact information at EDIRC.
Series data maintained by Nancy Cotterman ().