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Tracing Equilibrium in Dynamic Markets via Distributed Adaptation

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Cheung,  Yun Kuen
Algorithms and Complexity, MPI for Informatics, Max Planck Society;

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arXiv:1804.08017.pdf
(Preprint), 725KB

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Citation

Cheung, Y. K., Hoefer, M., & Nakhe, P. (2018). Tracing Equilibrium in Dynamic Markets via Distributed Adaptation. Retrieved from http://arxiv.org/abs/1804.08017.


Cite as: http://hdl.handle.net/21.11116/0000-0002-AE08-2
Abstract
Competitive equilibrium is a central concept in economics with numerous applications beyond markets, such as scheduling, fair allocation of goods, or bandwidth distribution in networks. Computation of competitive equilibria has received a significant amount of interest in algorithmic game theory, mainly for the prominent case of Fisher markets. Natural and decentralized processes like tatonnement and proportional response dynamics (PRD) converge quickly towards equilibrium in large classes of Fisher markets. Almost all of the literature assumes that the market is a static environment and that the parameters of agents and goods do not change over time. In contrast, many large real-world markets are subject to frequent and dynamic changes. In this paper, we provide the first provable performance guarantees of discrete-time tatonnement and PRD in markets that are subject to perturbation over time. We analyze the prominent class of Fisher markets with CES utilities and quantify the impact of changes in supplies of goods, budgets of agents, and utility functions of agents on the convergence of tatonnement to market equilibrium. Since the equilibrium becomes a dynamic object and will rarely be reached, our analysis provides bounds expressing the distance to equilibrium that will be maintained via tatonnement and PRD updates. Our results indicate that in many cases, tatonnement and PRD follow the equilibrium rather closely and quickly recover conditions of approximate market clearing. Our approach can be generalized to analyzing a general class of Lyapunov dynamical systems with changing system parameters, which might be of independent interest.