Walrasian Allocations Without Price-Taking Behavior

Oscar Volij () and Roberto Serrano

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Consider an exchange economy where agents are arbitragers, in that they try to upset allocations imagining plausible beneficial trades. With an introspective algorithm, each agent constructs an interactive choice set (ICS), i.e., a set of bundles that he considers achievable through a sequence of plausible trades with other agents. We show that Walrasian allocations can be characterized as those where each agent chooses optimally from his ICS, which is always contained in a budget set (with differentiability, both sets coincide). Our analysis provides a different behavioral assumption underlying Walrasian allocations, offers an explanation for the source of competitive prices, and connects with the core convergence theorem.

Date: 2000-11-01
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Published in Journal of Economic Theory, November 2000, vol. 95 no. 1, pp. 79-106

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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:5168

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