Perfect Competition in a Bilateral Monopoly (In honor of Martin Shubik)
AbstractWe 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.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1534.
Length: 24 pages
Date of creation: Sep 2005
Date of revision:
Publication status: Published in Games and Economic Behavior (Special Issue in Honor of Martin Shubik) (January 2009), 65(1), 124-141
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-04 (All new papers)
- NEP-COM-2005-10-04 (Industrial Competition)
- NEP-GTH-2005-10-04 (Game Theory)
- NEP-IND-2005-10-04 (Industrial Organization)
- NEP-MIC-2005-10-04 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Mas-Colell, Andreu, 1980. "Noncooperative approaches to the theory of perfect competition: Presentation," Journal of Economic Theory, Elsevier, vol. 22(2), pages 121-135, April.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- MERTENS , Jean-François, 1996.
"The limit-price mechanism,"
CORE Discussion Papers
1996050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dubey, Pradeep, 1982. "Price-Quantity Strategic Market Games," Econometrica, Econometric Society, vol. 50(1), pages 111-26, January.
- Hurwicz, L, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 217-25, April.
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