Farsighted stability of the competitive allocations in an exchange economy with indivisible goods

Abstract

The set of competitive allocations in an exchange economy with indivisible goods of Shapley and Scarf (1974) is an important solution concept in the literature. In this paper, we consider a farsighted version of the von Neumann and Morgenstern stable set by using the farsighted approach of Chwe (1994) and by modifying the domination relation defined by Wako (1999) to incorporate farsightedness. We show that there exists a unique farsighted stable set, which coincides with the set of competitive allocations.