Quality of local equilibria in discrete exchange economies

DOI10.1016/J.JMATECO.2020.03.012zbMATH Open1434.91042arXiv1807.00304OpenAlexW3015323344MaRDI QIDQ2178594FDOQ2178594

Authors: Daniel Lehmann 

Publication date: 11 May 2020

Published in: Journal of Mathematical Economics (Search for Journal in Brave)

Abstract: This paper defines the notion of a local equilibrium of quality $(r,s)$, $0leqr,s$, in a discrete exchange economy: a partial allocation and item prices that guarantee certain stability properties parametrized by the numbers $r$ and $s$. The quality $(r,s)$ measures the fit between the allocation and the prices: the larger $r$ and $s$ the closer the fit. For $r,sleq1$ this notion provides a graceful degradation for the conditional equilibria of [10] which are exactly the local equilibria of quality $(1,1)$. For $1<r,s$ the local equilibria of quality $(r,s)$ are {em more stable} than conditional equilibria. Any local equilibrium of quality $(r,s)$ provides, without any assumption on the type of the agents' valuations, an allocation whose value is at least $fracrs1+rs$ the optimal fractional allocation. In any economy in which all agents' valuations are $a$-submodular, i.e., exhibit complementarity bounded by $a:geq:1$, there is a local equilibrium of quality $(frac1a,frac1a)$. In such an economy any greedy allocation provides a local equilibrium of quality $(1,frac1a)$. Walrasian equilibria are not amenable to such graceful degradation.

Full work available at URL: https://arxiv.org/abs/1807.00304

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zbMATH Keywords

local equilibriadiscrete exchange economiesitem prices

Mathematics Subject Classification ID

Microeconomic theory (price theory and economic markets) (91B24) Special types of economic equilibria (91B52)

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Cited In (5)

• Combinatorial auctions with endowment effect
• Equilibrium in a discrete exchange economy with regional sub-economies
• Equilibrium in a finite local public goods economy
• Local equilibria in economic games
• On the uniqueness of local equilibria

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