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A Stylized Software Model to Explore the Free Market Equality/Efficiency Tradeoff

  • Hugues BersiniEmail author
  • Nicolas van Zeebroeck
Chapter
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Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 669)

Abstract

This paper provides an agent-based software exploration of the well-known free market efficiency/equality trade-off. Our study simulates the interaction of agents producing, trading and consuming goods in the presence of different market structures, and looks at how efficient the producers/consumers mapping turn out to be as well as the resulting distribution of welfare among agents at the end of an arbitrarily large number of iterations. Two market mechanisms are compared: the competitive market (a double auction market in which agents outbid each other in order to buy and sell products) and the random one (in which products are allocated randomly). Our results confirm that the superior efficiency of the competitive market (an effective and never stopping producers/consumers mapping and a superior aggregative welfare) comes at a very high price in terms of inequality (above all when severe budget constraints are in play).

Keywords

Competitive Market Market Failure Reservation Price Total Utility Initial Endowment 
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Copyright information

© Springer International Publishing Switzerland 2014

Authors and Affiliations

  1. 1.IRIDIA-CODEUniversité Libre de BruxellesBruxellesBelgium
  2. 2.ECARES and IRIDIA-CODEUniversité Libre de BruxellesBruxellesBelgium

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