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Comparative statics in a simple class of strategic market games

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  • Amir, Rabah
  • Bloch, Francis

Abstract

This paper investigates the effects of entry in two-sided markets where buyers and sellers act strategically. Applying new tools from supermodular optimization/games, sufficient conditions for different comparative statics results are obtained. While normality of one good is sufficient for the equilibrium price to be increasing in the number of buyers, normality of both goods is required for equilibrium bids and sellers' equilibrium utilities to be increasing in the number of buyers. When the economy is replicated, normality of both goods and gross substitutes guarantee that the equilibrium of the strategic market game converges monotonically (in quantities) to the competitive equilibrium. Simple counter-examples are provided to settle other potential conjectures of interest.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 65 (2009)
Issue (Month): 1 (January)
Pages: 7-24

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Handle: RePEc:eee:gamebe:v:65:y:2009:i:1:p:7-24

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Strategic market games Two-sided markets Bilateral oligopoly Supermodularity and comparative statics Market entry;

References

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  1. Federico Echenique, 1999. "Comparative Statics by Adaptative Dynamics and the Correspondence Principle," Documentos de Trabajo (working papers) 2099, Department of Economics - dECON.
  2. Edlin, Aaron S. & Shannon, Chris, 1998. "Strict Monotonicity in Comparative Statics," Journal of Economic Theory, Elsevier, vol. 81(1), pages 201-219, July.
  3. AMIR, Rabah, 1994. "Cournot Oligopoly and the Theory of Supermodular Games," CORE Discussion Papers 1994013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Amir, R., 1991. "Sensitivity analysis of multi-sector optimal economic dynamics," CORE Discussion Papers 1991006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Bloch, Francis & Ghosal, Sayantan, 1997. "Stable Trading Structures in Bilateral Oligopolies," Journal of Economic Theory, Elsevier, vol. 74(2), pages 368-384, June.
  6. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, September.
  7. Amir, Rabah & Sahi, Siddharta & Shubik, Martin & Yao, Shuntian, 1990. "A strategic market game with complete markets," Journal of Economic Theory, Elsevier, vol. 51(1), pages 126-143, June.
  8. Amir, Rabah & Lambson, Val E, 2000. "On the Effects of Entry in Cournot Markets," Review of Economic Studies, Wiley Blackwell, vol. 67(2), pages 235-54, April.
  9. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  10. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
  11. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
  12. Bloch, Francis & Ferrer, Helene, 2001. "Trade Fragmentation and Coordination in Strategic Market Games," Journal of Economic Theory, Elsevier, vol. 101(1), pages 301-316, November.
  13. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-68, October.
  14. Peck, James & Shell, Karl, 1990. "Liquid markets and competition," Games and Economic Behavior, Elsevier, vol. 2(4), pages 362-377, December.
  15. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
  16. BLOCH, Francis & FERRER, Hélène, 1998. "Strategic complements and substitutes in bilateral oligopolies," CORE Discussion Papers 1998030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Postlewaite, A & Schmeidler, David, 1978. "Approximate Efficiency of Non-Walrasian Nash Equilibria," Econometrica, Econometric Society, vol. 46(1), pages 127-35, January.
  18. Aditya Goenka & David Kelly & Stephen Spear, . "Endogenous Strategic Business Cycles," GSIA Working Papers 2, Carnegie Mellon University, Tepper School of Business.
  19. Koutsougeras, Leonidas C., 2003. "Non-Walrasian equilibria and the law of one price," Journal of Economic Theory, Elsevier, vol. 108(1), pages 169-175, January.
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Citations

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Cited by:
  1. Alex Dickson, 2013. "The Effects of Entry in Bilateral Oligopoly," Games, MDPI, Open Access Journal, vol. 4(3), pages 283-303, June.
  2. Francis Bloch & Ben Zissimos, 2008. "Optimum Tariffs and Retaliation: How Country Numbers Matter," Vanderbilt University Department of Economics Working Papers 0802, Vanderbilt University Department of Economics.
  3. Yukihiko Funaki & Harold Houba & Evgenia Motchenkova, 2012. "Market Power in Bilateral Oligopoly Markets with Nonexpandable Infrastructures," Tinbergen Institute Discussion Papers 12-139/II, Tinbergen Institute.
  4. Yukihiko Funaki & Harold Houba & Evgenia Motchenkova, 2012. "Market Power in Bilateral Oligopoly Markets with Nonexpandable Infrastructures," Tinbergen Institute Discussion Papers 12-139/II, Tinbergen Institute.
  5. Faias, Marta & Moreno, Emma & Wooders, Myrna, 2009. "A Strategic market game approach for the private provision of public goods," MPRA Paper 37777, University Library of Munich, Germany, revised 08 Mar 2012.
  6. Dmitry Levando, 2012. "A Survey Of Strategic Market Games," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(194), pages 63-106, July - Se.
  7. repec:van:wpaper:1201 is not listed on IDEAS

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