Inefficiency caused by random matching and heterogeneity |
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Authors: | Klaus Kultti |
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Institution: | (1) Department of Economics, University of Helsinki, P.O. Box 17, 00014 Helsinki, Finland;(2) Helsinki Center of Economic Research (HECER), University of Helsinki, P.O. Box 17, 00014 Helsinki, Finland |
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Abstract: | I study an economy with sellers and buyers with unit supplies and unit demands. Both parties have valuations uniformly distributed
on a unit interval. I quantify the inefficiency, compared to the Walrasian markets, when the agents meet randomly. There are
several causes of inefficiency that I deal with separately. First, even if there is perfect information about valuations it
makes a difference whether all agents participate in the markets or whether only those who would trade in the Walrasian market
participate. The same applies when there is private information about valuations. |
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Keywords: | |
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