Decentralized trade, random utility and the evolution of social welfare

Michihiro Kandori, Roberto Serrano, Oscar Volij

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


We study decentralized trade processes in general exchange economies and house allocation problems with and without money. The processes are affected by persistent random shocks stemming from agents' maximization of random utility. By imposing structure on the utility noise term-logit distribution-one is able to calculate exactly the stationary distribution of the perturbed Markov process for any level of noise. We show that the stationary distribution places the largest probability on the maximizers of weighted sums of the agents' (intrinsic) utilities, and this probability tends to 1 as noise vanishes.

Original languageEnglish
Pages (from-to)328-338
Number of pages11
JournalJournal of Economic Theory
Issue number1
StatePublished - 1 May 2008


  • Decentralized trade
  • Exchange economies
  • Housing markets
  • Logit model
  • Long-run stochastic stability
  • Social welfare functions

ASJC Scopus subject areas

  • Economics and Econometrics


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