Market Equilibrium with Transaction Costs

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 -approximate equilibrium prices and allocations in O 1 (n + log m)mn log(B/ ) 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.

• Type: Journal
• Year: 2010
• Where: CORR
• Authors: Sourav Chakraborty, Nikhil R. Devanur, Chinmay Karande
• Keywords: Buyers, Classical Fisher Market, CORR 2010, Education, Identical Products