The Emergence of a Price System from Decentralized Bilateral Exchange
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Herbert Gintis
This paper analyzes the dynamics of completely decentralized bilateral exchange. In such a framework, neither money nor prices as public information exist. Rather, prices represent an agent's barter strategy, and hence are private information. We call these private prices. Agents formulate trade offers and accept or reject offers from other traders, on the basis of their private prices. Private prices are updated by low-scoring agents periodically imitating the strategies of higher-scoring agents. We show that a system of quasi-public prices emerges in the medium run, and these quasi-public prices converge to stationary distributions that are approximately competitive equilibria of the underlying Walrasian model in the long run. We thus provide, for the first time, a general, decentralized disequilibrium adjustment mechanism that renders market equilibrium dynamically stable in a highly simplified production and exchange economy.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Artikel in diesem Heft
- Advances Article
- Evolutionary Dynamics and Long-Run Selection
- Party Competition under Private and Public Financing: A Comparison of Institutions
- Limited Observation in Mutual Consent Networks
- Status Concerns and Occupational Choice Under Uncertainty
- Choice under Limited Uncertainty
- A Vague Theory of Choice over Time
- Strategic Implications of Uncertainty over One's Own Private Value in Auctions
- Contributions Article
- Snobs and Quality Gaps
- General Option Exercise Rules, with Applications to Embedded Options and Monopolistic Expansion
- Liars and Inspectors: Optimal Financial Contracts When Monitoring is Non-Observable
- Inefficiency in a Bilateral Trading Problem with Cooperative Investment
- A Spatial Election with Common Values
- Is Sustainable Development Compatible with Rawlsian Justice?
- Multiple Lending and Constrained Efficiency in the Credit Market
- The Uniqueness of Stable Matchings
- Assessing the Likelihood of Panic-Based Bank Runs
- Are Manufacturers Competing through or with Supermarkets? A Theoretical Investigation
- Existence of Equilibrium for Segmented Markets Models with Interest Rate Monetary Policies
- Affiliated Common Value Auctions with Differential Information: The Two Bidder Case
- The Emergence of a Price System from Decentralized Bilateral Exchange
- Finite Memory Distributed Systems
- Topics Article
- Special Interest Politics and Endogenous Lobby Formation
- Robust Portfolio Selection with and without Relative Entropy
- Increased Risk-Bearing with Background Risk
- Resources as an Input of Production in a Two-Sector Economy
- Why the Reserve Price Should Not Be Kept Secret
- A Strategic Analysis of Terrorist Activity and Counter-Terrorism Policies
- The Role of Observability in Futures Markets
- An Amendment to Baumol's Burden Test
- Pareto Improving Lotteries and Voluntary Public Goods Provision
- Endogenous Favoritism in Organizations
- Age Bias in Fiscal Policy: Why Does the Political Process Favor the Elderly?
- Fundamental and Secondary R&D Races
- Rat Races and Glass Ceilings
- On the Number of Contestants and Equilibrium Individual Effort
- Vertical Differentiation: Multiproduct Strategy to Face Entry?
- Rational Sabotage in Cooperative Production with Heterogeneous Agents
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- On the Signalling Role of Debt Maturity
- Equilibrium Uniqueness in a Cournot Model with Demand Uncertainty
- Monopoly Pricing over Time and the Timing of Investments
- Shirking and Squandering in Sharing Games
- Nonrevealing Equilibria and Consumption-Based Asset Pricing Models