Successive Oligopolies in a Pure Exchange Economy

In this paper we assume a market structure in which there are whole-sellers, retailers and consumers. The product sold to the consumers is initially endowed with the whole-sellers. The whole-sellers value both the product and money. The retailers are not endowed with anything at all. The retailers submit bids in units of money to the wholesellers from the revenue earned by selling the product to the consumers. The whole-sellers offer the product to the retailers who in turn sell it to the consumers. The retailers care only for money. In this model there is a trivial equilibrium with no bids or offers being submitted. In addition we establish that a unique non-trivial equilibrium exists in which every trader participates in the market. Further, such an equilibrium is symmetricall whole-sellers offer the same quantity of the product and all retailers bid the same quantity of money. We also obtain some comparative static results