The evolution of exchange

Assaf Ben-Shoham, Roberto Serrano, Oscar Volij

Research output: Contribution to journalArticlepeer-review

12 Scopus citations


Stochastic stability is applied to the problem of exchange. We analyze the stochastic stability of two dynamic trading processes in a simple housing market. In both models, traders meet in pairs at random and exchange their houses when trade is mutually beneficial, but occasionally they make mistakes. The models differ in the probability of mistakes. When all mistakes are equally likely, the set of stochastically stable allocations contains the set of efficient allocations. When more serious mistakes are less likely, the stochastically stable states are those allocations, always efficient, with the lowest envy level.

Original languageEnglish
Pages (from-to)310-328
Number of pages19
JournalJournal of Economic Theory
Issue number2
StatePublished - 1 Jan 2004
Externally publishedYes


  • Efficiency
  • Envy
  • Exchange
  • Housing problem
  • Stochastic stability

ASJC Scopus subject areas

  • Economics and Econometrics


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