Ghosal, S., and Porter, J. (2013) Decentralised exchange, out-of-equilibrium dynamics and convergence to efficiency. Mathematical Social Sciences, 66(1), pp. 1-21. (doi:10.1016/j.mathsocsci.2012.12.005)
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In this paper, we study out-of-equilibrium dynamics with decentralised exchange (bilateral bargaining between randomly matched pairs of agents). We characterise the conditions under which out-of-equilibrium trading converges to efficient allocations when agents are myopic, have limited information and incur utility losses relative to current holdings by engaging in (bounded) experimentation. We show, numerically, that the rate of convergence to efficient allocations is exponential across a variety of different settings where agents’ preferences can be represented by a Cobb–Douglas utility function. Finally the results are generalised to explicit exchange networks.
|Glasgow Author(s) Enlighten ID:||Ghosal, Professor Sayantan|
|Authors:||Ghosal, S., and Porter, J.|
|College/School:||College of Social Sciences > Adam Smith Business School > Economics|
|Journal Name:||Mathematical Social Sciences|
|Published Online:||16 January 2013|