The Edgeworth Conjecture with Small Coalitions and Approximate Equilibria in Large Economies

Abstract: We revisit the connection between bargaining and equilibrium in exchange economies, and study its algorithmic implications. We consider bargaining outcomes to be allocations that cannot be blocked (i.e., profitably re-traded) by coalitions of small size and show that these allocations must be approximate Walrasian equilibria. Our results imply that deciding whether an allocation is approximately Walrasian can be done in polynomial time, even in economies for which finding an equilibrium is known to be computationally hard.