(DP 2010-02) Gatekeeper Versus Auctioneer: A Non-Tatonnement Result

Emmanuel S. de Dios, Grace T. Ong


A non-tatonnement process is described using the simplest demand-and-supply model, involving the following: uniformly distributed agents; random matching of buyers and sellers; and a universal permission to engage in mutually acceptable trade at non-equilibrium prices. A sufficient condition is then stated where expected welfare gains are paradoxically greater when the number of market agents is restricted, compared to when all traders are allowed to participate.

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