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Market Equilibrium with Transaction Costs

By Sourav Chakraborty, Nikhil R Devanur and Chinmay Kar


Abstract. Identical products being sold at different prices in different locations is a common phenomenon. To model such scenarios, we supplement the classical Fisher market model by introducing transaction costs. For every buyer i and good j, there is a transaction cost of cij; if the price of good j is pj, then the cost to the buyer i per unit of j is pj +cij. The same good can thus be sold at different (effective) prices to different buyers. We provide a combinatorial algorithm that computes ǫ-approximate equilibrium prices and allocations in O ( 1 ǫ (n+logm)mnlog(B/ǫ)) operations- where m is the number goods, n is the number of buyers and B is the sum of the budgets of all the buyers

Year: 2011
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