Error message

Deprecated function: Array and string offset access syntax with curly braces is deprecated in include_once() (line 20 of /mnt/web104/a0/07/510451407/htdocs/includes/

Dynamic recontracting processes with multiple indivisible goods

Printer-friendly version
Working paper
Olivier Bochet, Bettina Klaus and Markus Walzl
Issue number: 
Maastricht University
We consider multiple-type housing markets. To capture the dynamic aspect of trade in such markets, we study a dynamic recontracting process similar to the one introduced by Serrano and Volij (2005). First, we analyze the set of recurrent classes of this process as a (non-empty) solution concept. We show that each core allocation always constitutes a singleton recurrent class and provide examples of non-singleton recurrent classes consisting of blocking-cycles of individually rational allocations. For multiple-type housing markets stochastic stability never serves as a selection device among recurrent classes. Next, we propose a method to compute the limit invariant distribution of the dynamic recontracting process. The limit invariant distribution exploits the interplay of coalitional stability and accessibility that determines a probability distribution over final allocations. We provide various examples to demonstrate how the limit invariant distribution discriminates among stochastically stable allocations: surprisingly, some core allocations are less likely to be final allocations of the dynamic process than cycles composed of non-core allocations.
Developed by Paolo Gittoi