Seller Automata in a Model of Exchange

Richard Stahnke ()
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Richard Stahnke: Columbia University

No 1353, Computing in Economics and Finance 1999 from Society for Computational Economics

Abstract: This model simulates a simple exchange economy made up of geographically dispersed agents with spatially correlated initial endowments who incur transactions costs in the process of trading. Agents are able to advertise globally at no cost in order to inform other agents of potential trading opportunities, but they must pay a transaction cost proportional to the distance traveled to visit an agent in order to engage in trade. Although trade is shown to improve the efficiency of the economy in most cases, the accuracy of advertised information depreciates so rapidly in the process of trading that there is a range of transaction costs where efficiency actually falls as a result of trade. Increasing transaction costs diminish this depreciation of information by curtailing trade, and this trade-off results in a range of transaction costs where efficiency is not decreasing in transaction costs. The effect of trade on inequality depends on the measure of wealth. The presence of highly spatially correlated initial endowments is shown to diminish slightly the benefits of trade relative to the randomly allocated initial endowments case.

Date: 1999-03-01
New Economics Papers: this item is included in nep-evo and nep-mic
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