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

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


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).


Competitive Market Market Failure Reservation Price Total Utility Initial Endowment 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. 1.
    Bersini H (2012) UML for ABM. J Artif Soc Soc Simul 15(1):9Google Scholar
  2. 2.
    Binmore K (2005) Natural justice. Oxford University Press, New YorkCrossRefGoogle Scholar
  3. 3.
    Cassidy J (2009) How markets fail. Penguin Books, London, EnglandGoogle Scholar
  4. 4.
    Dworkin R (1981) What is equality? Part 1: Equality of welfare. Philos Public Aff 10(3): 185–246Google Scholar
  5. 5.
    Fanoi S, Pellizzari P (2011) Time-dependent trading strategies in a continuous double auction. In: Osinga S, Hofstede GJ, Verwaart T (eds) Emergent results of atificial economics. Springer, Berlin/Heidelberg, pp 165–176CrossRefGoogle Scholar
  6. 6.
    Gode DK, Sunder S (1993) Allocative efficiency of markets with zero-intelligence traders: market as a partial substitute for individual rationality. J Political Eco 101(1):119–137CrossRefGoogle Scholar
  7. 7.
    Okun AK (1975) Equality and efficiency, the big tradeoff. The Brookings Institution, Washington, DCGoogle Scholar
  8. 8.
    Sen AK (1973) On economic inequality. Oxford University Press, USACrossRefGoogle Scholar

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

Personalised recommendations