Edgeworthian economies

Abstract

We present a model of an Edgeworthian exchange economy where two goods are traded in a random meeting market place. The novelty of our model is that we associate a greediness factor to each participant which brings up a game alike the prisoner's dilemma into the usual Edgeworthian exchange economy. Along the time, random pairs of participants are chosen, and they trade or not according to their greediness. Furthermore, we let the greediness of the participants evolve along the trades according to one of the following rules: (a) the greediness of the participants decreases if they were able to trade and increases otherwise; (b) the greediness of the participants increases if they were able to trade and decreases otherwise. We observe that for rule (a) the greediness of each participant converges to one of two possible values, and that for rule (b) the greediness of all participants converges to a single value. (© 2008 WILEY‐VCH Verlag GmbH & Co. KGaA, Weinheim)