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Competing in Several Areas Simultaneously: The Case of Strategic Asset Markets

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  • Manfred Nermuth

    ()
    (Department of Economics, University of Vienna, Hohenstaufengasse 9, A-1010 Vienna, Austria)

Abstract

We characterize the structure of Nash equilibria for a certain class of asset market games. In equilibrium, different assets have different returns, and (risk neutral) investors with different wealth hold portfolios with different structures. In equilibrium, an asset’s return is inversely related to the elasticity of its supply. The larger an investor, the more diversified is his portfolio. Smaller investors do not hold all the assets, but achieve higher percentage returns. More generally, our results can be applied also to other “multi-market games” in which several players compete in several arenas simultaneously, like multi-market Cournot oligopolies, or multiple rent-seeking games.

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Bibliographic Info

Article provided by MDPI, Open Access Journal in its journal Games.

Volume (Year): 2 (2011)
Issue (Month): 2 (April)
Pages: 209-234

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Handle: RePEc:gam:jgames:v:2:y:2011:i:2:p:209-234:d:12024

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Related research

Keywords: asset markets; Nash Equilibrium; multigames;

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  1. Hens, Thorsten & Schenk-Hoppe, Klaus Reiner, 2005. "Evolutionary stability of portfolio rules in incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 41(1-2), pages 43-66, February.
  2. Carlos Alós-Ferrer & Ana Ania, 2005. "The evolutionary stability of perfectly competitive behavior," Economic Theory, Springer, vol. 26(3), pages 497-516, October.
  3. Fernando Vega Redondo, 1996. "The evolution of walrasian behavior," Working Papers. Serie AD 1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  4. Carlos Alós-Ferrer & Ana B. Ania, 2003. "The Asset Market Game," Vienna Economics Papers 0320, University of Vienna, Department of Economics.
  5. Blume, Lawrence & Easley, David, 1992. "Evolution and market behavior," Journal of Economic Theory, Elsevier, vol. 58(1), pages 9-40, October.
  6. Leonidas Koutsougeras & Konstantinos Papadopoulos, 2004. "Arbitrage and equilibrium in strategic security markets," Economic Theory, Springer, vol. 23(3), pages 553-568, March.
  7. 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.
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