Ulric B. and Evelyn L. Bray Social Sciences Seminar

Abstract: 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 the market design that incorporates decentralized communication. Communication improves efficiency, but introduces with some probability outcomes inconsistent with Nash equilibria.

This study was written with Arthur Dolgopolov, Daniel Houser, and Thomas Stratmann. For the online seminar Professor Martinelli will be joined by guests Marina Nuñez and Matt Elliott.

How to view the seminar:
Sign up for a free twitch.tv account, and tune in on Wednesdays at 12 PM PST on twitch.tv/caltechecontheory. You will be able to ask questions on the Twitch chat.