Markets, Correlation, and Regret-Matching

Sergiu Hart
Andreu Mas-Colell

Inspired by the existing work on correlated equilibria and regret-based dynamics in games, we carry out a first
exploration of the links between the leading equilibrium concept for (exchange) economies, Walrasian equilibrium, and
the dynamics, specifically regret-matching dynamics, of trading games that fit the economic structure and have the
property that their pure Nash equilibria implement the Walrasian outcomes. Interestingly, in the case of quasilinear
utilities (or "transferable utility"), all the concepts essentially coincide, and we get simple deterministic dynamics
converging to Walrasian outcomes. Connections to sunspot equilibria are also studied.

September, 2013