Decentralized Trade, Random Utility and the Evolution of Social Welfare ("Journal of Economic Theory", 2008, Vol.140,.No. 1, 328-338. )

Michihiro Kandori, Roberto Serrano and Oscar Volij ()

No CARF-F-009, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: We study decentralized trade processes in general exchange economies and house allocation problems with and without money. The processes are subject to persistent random shocks stemming from agents' maximization of random utility. By imposing structure on the utility noise term -logit distribution-, one is able to calculate exactly the stationary distribution of the perturbed Markov process for any level of noise. We show that the stationary distribution places the largest probability on the maximizer of several social welfare functions in different variants of the model.

Pages: 21 pages
Date: 2004-06
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