CIREQ-McGill Seminar 2019-2020
joint with the Department of Economics, McGill University
Leacock 429 (McGill University, 855 Sherbrooke West)
Organizer : Rohan Dutta (McGill University)
We study theoretically and experimentally assignment markets, i.e. two-sided markets where indivisible heterogeneous items with unit demand and unit supply are traded for money, as exemplified by housing markets. We define an associated strategic market game, and show that every Nash equilibrium outcome of this game is a competitive equilibrium allocation with respect to an economy consisting exclusively of the goods that were traded. That is, inefficiency may arise from miscoordination because some goods are not traded. Experimental results show players behaving close to Nash equilibrium predictions for auction-like market designs and close to generalized bargaining for a market design that incorporates decentralized communication. Communication improves efficiency, but introduces with some probability outcomes inconsistent with competitive equilibrium.