Comparative Statics in Markets for Indivisible Goods
We complete the study of comparative statics initiated in Caplin and Leahy , which introduced a new mathematical apparatus for understanding NTU allocation markets, as such covering the housing market and other markets for large indivisible goods. We introduce homotopy methods to characterize how equilibrium changes in response to arbitrary parameter changes. Generically, we show that there can be five and only five qualitatively distinct forms of market transition: Graft; Prune and Plant; Prune and Graft; Cycle and Reverse; and Shift and Replant. Our path-following methods identify new algorithms for computing market equilibria.
We thank Mamoru Kaneko, John Leahy Sr., Jeffrey Mensch, Victor Norman, Michael Reiter, and Ennio Stacchetti, for helpful comments. Leahy thanks the NSF for financial support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Andrew Caplin & John Leahy, 2020. "Comparative statics in markets for indivisible goods," Journal of Mathematical Economics, . citation courtesy of