The Edgeworth exchange formulation of bargaining models and market experiments

Steven Gjerstad () and Jason Shachat

Microeconomics from EconWPA

Abstract: We construct Edgeworth exchange economies equivalent to demand and supply environments typically used in bargaining models and market experiments. This formulation clearly delineates environment, institution, and behavior for these models and experiments. To illustrate, we examine results by Gode and Sunder, who simulate random behavior in a double auction and argue that this institution leads to an efficient allocation, even in the absence of rationality. We use the Edgeworth exchange representation of their economic environment to demonstrate that they model individually rational behavior, and show that their model is a special case of theoretical results by Hurwicz, Radner, and Reiter.

Keywords: Double auction; Market experiment; Edgeworth exchange; Bounded rationality (search for similar items in EconPapers)
JEL-codes: C78 C92 D44 D51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-gth
Date: 2003-04-10
Note: Type of Document - PDF file (from LaTeX); prepared on MikTex (LaTeX for PC); to print on HP/PostScript; pages: 12 ; figures: included. This paper is a substantial revision of ``A General Equilibrium Structure for Induced Supply and Demand" (UCSD Economics Discussion Paper 96-35).
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpmi:0304004

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