Mistakes in cooperation: The stochastic stability of Edgeworth's recontracting

Arbeitspapier

In an exchange economyw ith a finite number of indivisible goods, we analyze a dynamic trading process of coalitional recontracting where agents may make mistakes with small probability. We show first that the recurrent classes of the unperturbed (mistakefree) process consist of (i) all core allocations as absorbing states, and (ii) cycles of non-core allocations. Next, we introduce a perturbed process, where the resistance of each transition is a function of the number of agents that make mistakes –do not improve– in the transition and of the seriousness of each mistake. If preferences are always strict, we show that the unique stochasticallystable state of the perturbed process is the Walrasian allocation. In economies with indifferences, non-core cycles are sometimes stochastically stable, while some core allocations are not.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2003-23

Classification and Topics

• Classification: Wirtschaft ; Exchange and Production Economies ; Allocative Efficiency; Cost-Benefit Analysis ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement
• Subject: stochastic stability , exchange economies , assignment problems , core , Walrasian equilibrium ; Gleichgewichtstheorie ; Tauschwirtschaft ; Allgemeines Gleichgewicht ; Allokation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Serrano, Roberto ; Volij, Oscar
• Event: Veröffentlichung
• (who): Brown University, Department of Economics
• (where): Providence, RI
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/80123
• Last update: 10.03.2025, 11:43 AM CET