Comparative statics in markets for indivisible goods

Andrew Caplin and John Leahy

Journal of Mathematical Economics, 2020, vol. 90, issue C, 80-94

Abstract: This paper builds upon Caplin and Leahy (2014), which introduced a new mathematical apparatus for understanding allocation markets with nontransferable utility, as such covering the housing market and other markets for large indivisible goods. In the current paper we complete the study of comparative statics initiated therein. We introduce homotopy methods to characterize how equilibrium changes in response to arbitrary parameter changes. Generically, we show that there can be five and only five qualitatively distinct forms of market transition: Graft; Prune and Plant; Prune and Graft; Cycle and Reverse; and Shift and Replant. Our path-following methods identify new algorithms for computing market equilibria.

Keywords: Indivisible goods; Allocation markets; Non-transferable utility (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: Comparative Statics in Markets for Indivisible Goods (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:90:y:2020:i:c:p:80-94

DOI: 10.1016/j.jmateco.2020.06.003

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