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The Evolution of Exchange

Roberto Serrano (), Assaf Ben-Shoham and Oscar Volij ()
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Assaf Ben-Shoham: Department of Economics, Hebrew University.

Economic theory and game theory from Oscar Volij

Abstract: Stochastic stability is applied to the problem of exchange. We analyze the stochastic stability of two dynamic trading processes in a simple housing market. In both models traders meet in pairs at random and exchange their houses when trade is mutually beneficial, but occasionally they make mistakes. The models differ in the probability of mistakes. When all mistakes are equally likely, the set of stochastically stable allocations contains the set of efficient allocations. When more serious mistakes are less likely, the stochastically stable states are those allocations, always efficient, with the lowest envy-level.

Keywords: stochastic stability; exchange; housing problem; efficiency; envy. (search for similar items in EconPapers)
JEL-codes: C7 D51 D61 D63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo, nep-ind and nep-mic
Date: 2000-05-25
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Published in Journal of Economic Theory, 114, (2004), 310-328.

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http://volij.co.il/publications/papers/HOUSING4.pdf (application/pdf)

Related works:
Journal Article: The evolution of exchange (2004) Downloads
Working Paper: The Evolution of Exchange (2004)
Working Paper: The Evolution of Exchange (2000) Downloads
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