DP5795 General Equilibrium and the Emergence of (Non) Market Clearing Trading Institutions

Author(s):	Carlos Alos-Ferrer, Georg Kirchsteiger
Publication Date:	September 2006
Keyword(s):	evolution of trading platforms, general equilibrium, learning, market institutions, rationing
JEL(s):	C72, C83, D4, D5, L1
Programme Areas:	Industrial Organization
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=5795

We consider a pure exchange economy, where for each good several trading institutions are available, only one of which is market-clearing. The other feasible trading institutions lead to rationing. To learn on which trading institutions to coordinate, traders follow behavioural rules of thumb that are based on the past performances of the trading institutions. Given the choice of institutions, market outcomes are determined by an equilibrium concept that allows for rationing. We find that full coordination on the market-clearing institutions without any rationing is a stochastically stable outcome, independently of the characteristics of the alternative available institutions. We also find, though, that coordination on other, non-market-clearing institutions with rationing can be stochastically stable.