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Perfect competition in an oligopoly (including bilateral monopoly)

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  • Dubey, Pradeep
  • Sondermann, Dieter

Abstract

We show that if limit orders are required to vary smoothly, then strategic (Nash) equilibria of the double auction mechanism yield competitive (Walras) allocations. It is not necessary to have competitors on any side of any market: smooth trading is a substitute for price wars. In particular, Nash equilibria are Walrasian even in a bilateral monopoly.

Suggested Citation

  • Dubey, Pradeep & Sondermann, Dieter, 2009. "Perfect competition in an oligopoly (including bilateral monopoly)," Games and Economic Behavior, Elsevier, vol. 65(1), pages 124-141, January.
    • Handle: RePEc:eee:gamebe:v:65:y:2009:i:1:p:124-141
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    References listed on IDEAS

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    Cited by:

    1. Dmitry Levando, 2012. "A Survey Of Strategic Market Games," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 57(194), pages 63-106, July - Se.

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    More about this item

    Keywords

    Limit orders Double auction Nash equilibria Walras equilibria Mechanism design;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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