| Author: | Serrano, R. Volij, O. |
| Title: | Walrasian Allocations without Price-Taking Behavior |
| Journal: | Journal of Economic Theory
2000 : NOV, VOL. 95:1, p. 79-106 |
| Index terms: | PRICE THEORY PRICE CONTROL PRICING BEHAVIOURAL SCIENCE |
| Language: | eng |
| Abstract: | Consider an exchange economy where agents are arbitrages, 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. The authors show that Walrasian allocations can be characterized as those where each agent chooses optimally from ICS, which is always contained in a budget set (with differentiability, both sets coincide). The authors' analysis provides a different behavioral assumption underlying Walrasian allocations, offers an explanation for the source of competitive prices, are connected with the core convergence theorem. |
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