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Repeated Trade and the Velocity of Money

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Author Info
Martin Shubik () (Cowles Foundation, Yale University)
Pradeep Dubey (SUNY at Stony Brook)
Siddhartha Sahi (Princeton University)

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Abstract

There are two sources of inefficiency of strategic equilibria (SE) in market mechanisms. The first is the oligopolistic effect, which occurs when an agent can single-handedly influence prices. With a continuum of agents we get "perfect competition" and this effect is, of course, wiped out. But the inefficiency of SE's may nevertheless persist because agents are not "perfectly liquid," i.e., the constraints of the mechanism are such that they cannot carry out arbitrary trades at the market prices. Our main result is that, if enough repeated rounds of trade are permitted within a single utility period, then the liquidity problem is overcome: SE outcomes turn out to be not only efficient but, in fact, Walrasian.

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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 895.

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Length: 16 pages
Date of creation: Jan 1989
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Publication status: Published in Journal of Mathematical Economics, 22, 1993
Handle: RePEc:cwl:cwldpp:895

Note: CFP 842.
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Keywords: Walrasian equilibrium oligopoly trading

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References listed on IDEAS
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.:
  1. Pradeep Dubey & Martin Shubik, 1979. "A Strategic Market Game with Price and Quantity Strategies," Cowles Foundation Discussion Papers 521, Cowles Foundation, Yale University. [Downloadable!]
  2. Dubey, Pradeep & Mas-Colell, Andreau & Shubik, Martin, 1980. "Efficiency properties of strategies market games: An axiomatic approach," Journal of Economic Theory, Elsevier, vol. 22(2), pages 339-362, April. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. Dubey, Pradeep, 1982. "Price-Quantity Strategic Market Games," Econometrica, Econometric Society, vol. 50(1), pages 111-26, January. [Downloadable!] (restricted)
  5. Rabah Amir & Siddhartha Sahi & Martin Shubik, 1986. "A Strategic Market Game with Complete Markets," Cowles Foundation Discussion Papers 814R, Cowles Foundation, Yale University, revised Sep 1987. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Shorish, Jamsheed, 2006. "Functional Rational Expectations Equilibria in Market Games," Economics Series 186, Institute for Advanced Studies. [Downloadable!]
  2. Thomas Quint & Martin Shubik, 2004. "A Consumable Money. An Elementary Discussion of Commodity Money, Fiat Money and Credit: Part I," Cowles Foundation Discussion Papers 1455, Cowles Foundation, Yale University. [Downloadable!]
  3. Sayantan Ghosal & Massimo Morelli, 2002. "Retrading in Market Games," Economics Working Papers 0012, Institute for Advanced Study, School of Social Science. [Downloadable!]
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  4. Gaël Giraud, 2004. "The limit-price exchange process," Cahiers de la Maison des Sciences Economiques b04118, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  5. Irasema Alonso, 2001. "Patterns of Exchange, Fiat Money, and Coordination," Advances in Macroeconomics, Berkeley Electronic Press, vol. 1(advances/), pages 1026-1026. [Downloadable!] (restricted)
  6. Martin Shubik & Shuntian Yao, 1992. "Transactions Loans, Intertemporal Loans, Variable Velocity, the Rates of Interest and Commodity Money: Part 1. Transactions Loans," Cowles Foundation Discussion Papers 1014, Cowles Foundation, Yale University. [Downloadable!]
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