FEEM working papers "Note di lavoro" series
2009 .051

Dynamics, Stability, and Foresight in the Shapley-Scarf Housing Market

Authors: Yoshio Kamijo, Ryo Kawasaki
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Indivisible Goods Market,Dynamics,Competitive Allocation,Strict Core,Foresight,Stable Set
JEL n.: D78,C71
JEL: Journal of Mathematical Economics
Pages: Vol. 46, No. 2, pp. 214-222
Date: 2010


While most of the literature starting with Shapley and Scarf (1974) have considered a static exchange economy with indivisibilities, this paper studies the dynamics of such an economy. We find that both the dynamics generated by competitive equilibrium and the one generated by weakly dominance relation, converge to a set of allocations we define as strictly stable, which we can show to exist. Moreover, we show that even when only pairwise exchanges between two traders are allowed, the strictly stable allocations are attained eventually if traders are sufficiently farsighted.

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