Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 05/15: Bilateral exchange and competitive equilibrium

Sjur Didrik Flåm ()
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Sjur Didrik Flåm: Department of Economics, University of Bergen, Norway, Postal: Department of Economics, P.O. 7802, N-5020 Bergen

Abstract: Motivated by computerized markets, this paper considers direct exchange between matched agents, just two at a time. Each party holds a "commodity vector”, and each seeks, whenever possible, a better holding. Focus is on feasible, voluntary exchanges, driven only by (projected) differences in generalized gradients. The paper plays down the importance of agents’ competence, experience and foresight. It also reduces the role of optimization, and it allows non-smooth data. Yet it identi…es reasonable conditions which suffice for convergence to competitive equilibrium.

Keywords: bilateral exchange; convex preferences; competitive equilibrium; generalized gradients; transferable utility.

JEL-codes: C63; D03; D51

14 pages, October 3, 2015

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