Economics Seminar - How General Equilibrium in Markets with Indivisible Goods Obtains Thanks to Complexity: Theory and Experimental Test

Abstract: The absence of general economic equilibrium in markets with indivisible goods and homogeneous preferences is an open problem for decades. Individuals in such economies face NP-hard problems, challenging the assumption that they can efficiently solve them. Human decision-making often approximates solutions rather than aiming for optimality. We conjecture that markets drive prices in a region when the computational complexity of optimising becomes the hardest. We provide experimental evidence supporting our theoretical prediction.