Trade Rules for Uncleared Markets with a Variable Population

Abstract

We analyze markets in open economies in which the price of a traded commodity is fixed and as a result of this stickiness, the demand and the supply are possibly unequal. In our model, the agents have single peaked preferences on their consumption and production choices. For such markets, we analyze the implications of population changes as formalized by the well-known “consistency” property. We first characterize the subclass of “Uniform trade rules” that satisfies Pareto optimality, no-envy, and consistency. Next, we add an informational simplicity property which is called “independence of trade volume” and we show that among the “Uniform trade rules” that satisfy Pareto optimality, no-envy, and consistency, only the one that clear either the short or long side of the market satisfies independence of trade volume.