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Partial Equilibrium Analysis in a Market Game:the Strategic Marshallian Cross

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Author Info

  • Alex Dickson

    () (Keele University, Department of Economics)

  • Roger Hartley

    () (Keele University, Department of Economics)

Abstract

We show how non-price-taking behavior by agents in partial equilibrium can be analyzed using strategic versions of Marshallian supply and demand curves. There is a Nash equilibrium of a two-good, strategic market game at a given price if and only if the strategic supply and demand curves intersect at that price. This result allows us to prove new existence and uniqueness results for such games, which have previously been obtained only by imposing somewhat restrictive assumptions such as symmetry on each side of the market. It also enables us to show that many conventional comparative statics results of Marshallian analysis survive strategic play by buyers and sellers. Finally, we show that price manipulation in this game always has the effect of reducing supply and demand and that thick markets are almost competitive.

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Bibliographic Info

Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2004/07.

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Length: 36 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:kee:kerpuk:2004/07

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Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
Phone: +44 (0)1782 584581
Fax: +44 (0)1782 717577
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Web page: http://www.keele.ac.uk/depts/ec/cer/
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Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
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Web: http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm

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Keywords: Strategic Market Game; Imperfect Competition; Marshallian Cross;

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References

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  1. Richard Cornes & Roger Hartley, 2002. "Joint Production Games with Mixed Sharing Rules," Game Theory and Information 0211003, EconWPA.
  2. Richard Cornes & Roger Hartley, 2002. "Asymmetric Contests with General Technologies," Keele Economics Research Papers KERP 2002/22, Centre for Economic Research, Keele University.
  3. Cordella, Tito & Gabszewicz, Jean J., 1998. ""Nice" Trivial Equilibria in Strategic Market Games," Games and Economic Behavior, Elsevier, vol. 22(1), pages 162-169, January.
  4. Bloch, Francis & Ghosal, Sayantan, 1997. "Stable Trading Structures in Bilateral Oligopolies," Journal of Economic Theory, Elsevier, vol. 74(2), pages 368-384, June.
  5. Vives, Xavier, 1987. "Small Income Effects: A Marshallian Theory of Consumer Surplus and Downward Sloping Demand," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 87-103, January.
  6. Gabszewicz, Jean J & Grazzini, Lisa, 1999. " Taxing Market Power," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 475-97.
  7. Rabah Amir & Val E. Lambson, 1998. "On the Effects of Entry in Cournot Markets," CIE Discussion Papers 1998-06, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  8. 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.
  9. Peck, James & Shell, Karl & Spear, Stephen E., 1992. "The market game: existence and structure of equilibrium," Journal of Mathematical Economics, Elsevier, vol. 21(3), pages 271-299.
  10. GABSZEWICZ, Jean & MICHEL, Philippe, 1992. "Oligopoly equilibria in exchange economies," CORE Discussion Papers 1992047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. 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.
  12. Cornes, Richard & Hartley, Roger, 2003. " Risk Aversion, Heterogeneity and Contests," Public Choice, Springer, vol. 117(1-2), pages 1-25, October.
  13. Giraud, Gael, 2003. "Strategic market games: an introduction," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 355-375, July.
  14. Dubey, Pradeep & Shubik, Martin, 1978. "A theory of money and financial institutions. 28. The non-cooperative equilibria of a closed trading economy with market supply and bidding strategies," Journal of Economic Theory, Elsevier, vol. 17(1), pages 1-20, February.
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Cited by:
  1. Ji-Tian Jeng, 2005. "Bayesian-Cournot Competition," Keele Economics Research Papers KERP 2005/01, Centre for Economic Research, Keele University.
  2. R Cornes & R Hartley, 2005. "The Geometry of Aggregative Games," The School of Economics Discussion Paper Series 0514, Economics, The University of Manchester.

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