EconPapers    
Economics at your fingertips  
 

Walrasian TatÈ nnement by Sequential Pairwise Trading: Convergence and Welfare Implications

Maria-Augusta Miceli (), Federico Cecconi and Giovanni Cerulli ()

No 161, Working Papers from University of Rome La Sapienza, Department of Public Economics

Abstract: This paper characterizes the out-of-equilibrium dynamics of a symmetric, pure exchange economywith two goods and N agents with uniformly distributed preferences and identical endowments.Relaxing the auctioneer assumption, but maintaining a global price rule, sequentially random pairwise trading at out-of-equilibrium prices is allowed. Initial mispricing implies rationing, determining excess demand (supply) fading away only at convergence, when the price of the initially cheaper (more expensive) good becomes more expensive (cheaper) than the walrasian one. The system converges when the sequential price reaches the walrasian price evaluated at current updated endowments. A perfectly symmetric setting, by initial mispricing and consequent rationed trading, creates asymmetric resource allocations even at convergence, where welfare is less than a standardized 1% lower than the auctioneer Pareto one. This model sketches a possible basis for price over-reaction microfoundation and captures endogenous ""wealth divide"" among the population, induced by whether agent trading is dominatedby good preferences or just by speculation around their prices.

Keywords: pairwise exchange; tatônnement; rationing; mispricing; general equilibrium; walrasianequilibrium; sequential equilibrium; auctioneer; price overreaction; wealth divide; agent-based models; agent-based simulations. (search for similar items in EconPapers)
JEL-codes: C63 C68 D01 D03 D31 D51 D58 (search for similar items in EconPapers)
Pages: 44
Date: 2013-03
New Economics Papers: this item is included in nep-cmp
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://web.uniroma1.it/dip_ecodir/sites/default/files/wpapers/wp161.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sap:wpaper:wp161

Access Statistics for this paper

More papers in Working Papers from University of Rome La Sapienza, Department of Public Economics Contact information at EDIRC.
Bibliographic data for series maintained by Luisa Giuriato ().

 
Page updated 2020-03-29
Handle: RePEc:sap:wpaper:wp161