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Gale-Shapley Matching in an Evolutionary Trade Network Game

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Author Info
Leigh Tesfatsion (Iowa State University)

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Abstract

This study investigates the performance of Gale-Shapley matching in an evolutionary market context. Computational experimental findings are reported for an evolutionary match-and-play trade network game in which resource-constrained traders repeatedly choose and refuse trade partners in accordance with Gale-Shapley matching, participate in risky trades modelled as two-person prisoner's dilemma games, and evolve their trade strategies over time. Particular attention is focused on correlations between ex ante market structure and the formation of trade networks, and between trade network formation and the types of trade behavior and social welfare outcomes that these trade networks support. The main conclusion drawn from this study is that the optimality criteria conventionally used to evaluate the performance of matching mechanisms in static market contexts -- namely, core stability and Pareto optimality -- are highly incomplete indicators of performance from an evolutionary vantage point. The static viewpoint hides the strong role played by market structure and ex ante capacity constraints in determining the types of persistent matching networks that evolve, the types of persistent interaction behaviors that these networks support, and the transactions costs and inactivity costs to agents that the achievement of these persistent networks and behaviors entails. In addition, the static viewpoint takes preference rankings over potential partners as given whereas these rankings are continuously updated on the basis of past interactions in evolutionary settings. Indeed, matching behaviors and interaction behaviors evolve conjointly. This suggests the need for more comprehensive optimality criteria that take both facets into account.

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Publisher Info
Paper provided by EconWPA in its series Game Theory and Information with number 9805004.

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Length: 40 pages
Date of creation: 04 Jun 1998
Date of revision: 26 Jul 1998
Handle: RePEc:wpa:wuwpga:9805004

Note: Type of Document - Postscript ; prepared on PC-LaTeX; to print on Postscript; pages: 40 ; figures: Included. Prepared from dvips.
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Related research
Keywords: Evolutionary match-and-play game; Gale-Shapley matching; iterated prisoner's dilemma; trade networks; endogenous interations; agent-based computational economics.;

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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
C9 - Mathematical and Quantitative Methods - - Design of Experiments
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September. [Downloadable!] (restricted)
  2. Weisbuch, Gerard & Alan Kirman & Dorothea K. Herreiner, 1996. "Market Organization," Discussion Paper Serie B 391, University of Bonn, Germany. [Downloadable!]
    Other versions:
  3. Roth, Alvin E. & Sotomayor, Marilda, 1992. "Two-sided matching," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541 Elsevier. [Downloadable!] (restricted)
  4. Vriend, Nicolaas J, 1995. "Self-Organization of Markets: An Example of a Computational Approach," Computational Economics, Springer, vol. 8(3), pages 205-31, August.
  5. Esther Hauk, . "Leaving the Prison: A Discussion of the Iterated Prisoner's Dilemma under Preferential Partner Selection," Computing in Economics and Finance 1996 _067, Society for Computational Economics. [Downloadable!]
  6. Yannis M. Ioannides, 1996. "Evolution of Trading Structures," Working Papers 96-04-020, Santa Fe Institute.
  7. David Banks & Kathleen Carley, 1994. "Metric inference for social networks," Journal of Classification, Springer, vol. 11(1), pages 121-149, March. [Downloadable!] (restricted)
  8. David MCFADZEAN & Leigh TESFATSION, 1996. "A C++ Platform For The Evolution Of Trade Networks," Economic Report 39, Iowa State University Department of Economics. [Downloadable!]
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  9. Sergei Guriev & Igor Pospelov & Margarita Shakhova, . "Self-Organization of Trade Networks in an Economy with Imperfect Infrastructure," Computing in Economics and Finance 1996 _022, Society for Computational Economics. [Downloadable!]
  10. Leigh TESFATSION, 1995. "How Economists Can Get Alife," Economic Report 37, Iowa State University Department of Economics. [Downloadable!]
  11. Hirshlifer, David & Rassmusen, Eric, 1989. "Cooperation in a repeated prisoners' dilemma with ostracism," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 87-106, August. [Downloadable!] (restricted)
  12. George Mailath & Larry Samuelson & Avner Shaked, 1994. "Evolution and Endogenous Interactions," Game Theory and Information 9410003, EconWPA. [Downloadable!]
  13. Dan Ashlock & Mark D. Smucker & E. Ann Stanley & Leigh Tesfatsion, 1995. "Preferential Partner Selection in an Evolutionary Study of Prisoner's Dilemma," Game Theory and Information 9501002, EconWPA, revised 20 Jan 1995. [Downloadable!]
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  14. Leigh TESFATSION, 1995. "A Trade Network Game With Endogenous Partner Selection," Economic Report 36, Iowa State University Department of Economics. [Downloadable!]
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  15. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)
  16. Stanley, E.A. & Ashlock, D. & Tesfatsion, Leigh S., 2004. "Iterated Prisoner's Dilemma with Choice and Refusal of Partners," Staff General Research Papers 11180, Iowa State University, Department of Economics.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rodrigo J. Harrison & Roberto Munoz, 2003. "Stability and Equilibrium Selection in a Link Formation Game," Game Theory and Information 0306004, EconWPA. [Downloadable!]
  2. Leigh Tesfatsion, 1998. "Ex Ante Capacity Effects in Evolutionary Labor Markets with Adaptive Search," Labor and Demography 9811003, EconWPA. [Downloadable!]
  3. Bhaskar Dutta & Sayantan Ghosal & Debraj Ray, 2004. "Farsighted Network Formation," Working papers 122, Centre for Development Economics, Delhi School of Economics. [Downloadable!]
    Other versions:
  4. Matthew O. Jackson, 2003. "A survey of models of network formation: Stability and efficiency," Working Papers 1161, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
    Other versions:
  5. Matthew O. Jackson, 2002. "The Stability and Efficiency of Economic and Social Networks," Microeconomics 0211011, EconWPA. [Downloadable!]
  6. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers 1044, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
    Other versions:
  7. Francis Bloch (GREQAM and Universite de la Mediterranee), Garance Genicot (Georgetown University, and Debraj Ray (New York University and Instituto de Analisis Economico (CSIC)), . "Informal Insurance in Social Networks," Working Papers gueconwpa~04-04-16, Georgetown University, Department of Economics. [Downloadable!]
    Other versions:
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