Bilateral Exchange and Competitive Equilibrium

Motivated by computerized markets, this paper considers direct exchange between matched agents, just two at a time. Each party holds a ”commodity vector,” and each seeks, whenever possible, a better holding. Focus is on feasible, voluntary exchanges, driven only by (projected) differences in generalized gradients. The paper plays down the importance of agents’ competence, experience and foresight. It also reduces the role of optimization, and it allows non-smooth data. Yet it identifies reasonable conditions which suffice for convergence to competitive equilibrium.