TY - JOUR
T1 - Walrasian Allocations without Price-Taking Behavior
AU - Serrano, Roberto
AU - Volij, Oscar
N1 - Funding Information:
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. ν 2000 Academic Press 1A preliminary version of this paper circulated under the title ‘‘Abstract Equilibria, Interactive Choice Sets and Walrasian Allocations.’’ We thank anonymous referees for comments. We are especially grateful to Nir Dagan for his criticisms and for suggesting Example 4. We also thank seminar audiences at Brown, Carlos III, Duke North Carolina, Johns Hopkins, Rochester and Tel-Aviv, and participants at the Canadian Economic Theory Conference (Toronto), European Workshop on General Equilibrium (Manresa), North American Summer Meetings of the Econometric Society (Montreal) and International Conference on Game Theory (Stony Brook) for their comments. Research support from the U.S. Israel Binational Science Foundation and from Brown University through a Salomon research award is acknowledged. Serrano also acknowledges an Alfred P. Sloan Foundation Research Fellowship.
PY - 2000/1/1
Y1 - 2000/1/1
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=0242516321&partnerID=8YFLogxK
U2 - 10.1006/jeth.2000.2680
DO - 10.1006/jeth.2000.2680
M3 - Article
AN - SCOPUS:0242516321
SN - 0022-0531
VL - 95
SP - 79
EP - 106
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 1
ER -