A dynamic recontracting process for multiple-type housing markets

Bettina Klaus, Olivier Bochet, Markus Walzl

Research output: Contribution to journalArticlepeer-review

Abstract

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 (2008). 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. Furthermore, we discuss how the limit invariant distribution is influenced by the relative coalitional stability and accessibility of the different stochastically stable allocations. We illustrate our findings with several examples. In particular, we demonstrate that some core allocations are less likely to be final allocations of the dynamic process than cycles composed of non-core allocations.

Original languageEnglish (US)
Pages (from-to)84-98
Number of pages15
JournalJournal of Mathematical Economics
Volume47
Issue number1
DOIs
StatePublished - Jan 20 2011

Keywords

  • Core
  • Indivisible goods
  • Limit invariant distribution
  • Stochastic stability

ASJC Scopus subject areas

  • Economics and Econometrics
  • Applied Mathematics

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