Walrasian Allocations without Price-Taking Behavior

Roberto Serrano, Oscar Volij

Research output: Contribution to journalArticlepeer-review

10 Scopus citations

Abstract

Consider an exchange economy where agents are arbitragers, in that they try to upset allocations imagining plausible beneficial trades. With an introspective algorithm, each agent constructs an interactive choice set (ICS), i.e., a set of bundles that he considers achievable through a sequence of plausible trades with other agents. We show that Walrasian allocations can be characterized as those where each agent chooses optimally from his ICS, which is always contained in a budget set (with differentiability, both sets coincide). Our analysis provides a different behavioral assumption underlying Walrasian allocations, offers an explanation for the source of competitive prices, and connects with the core convergence theorem. Journal of Economic Literature Classification Numbers: D00, D51.

Original languageEnglish
Pages (from-to)79-106
Number of pages28
JournalJournal of Economic Theory
Volume95
Issue number1
DOIs
StatePublished - 1 Jan 2000
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Walrasian Allocations without Price-Taking Behavior'. Together they form a unique fingerprint.

Cite this