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Dynamic recontracting processes with multiple indivisible goods

Working paper
Author/s: 
Olivier Bochet, Bettina Klaus and Markus Walzl
Issue number: 
2007/61
Publisher: 
Maastricht University
Year: 
2007
PDF [1]
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.
Tags: 
Coalition Formation Theory [2]

Source URL:http://www.coalitiontheory.net/content/dynamic-recontracting-processes-multiple-indivisible-goods

Links
[1] http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2007_61.pdf [2] http://www.coalitiontheory.net/research-areas/coalition-formation-theory