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Auctions with Endogenous Supply and the Walrasian Outcome

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  • Damian S. Damianov

    ()
    (Keele University, Centre for Economic Research and School of Economic and Management Studies)

Abstract

In this paper we study a special class of mechanisms for price formation on mo-nopolistic markets: multiunit auctions with endogenous supply. We formally define these trade mechanisms as dynamic market games and characterize their subgame perfect equilibria. Conditions on the pricing rule are provided, which guarantee that the strategic equilibria of these market forms are competitive. The discriminatory auction is found to have Walrasian equilibria only, whereas the uniform price auction has additional non-Walrasian equilibria. The presented models provide a strategic foundation of the competitive equilibrium paradigm. We discuss some parallels of our results to Pigou's (1920) discussion on monopoly pricing.

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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 2006/12.

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Length: 27 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:kee:kerpuk:2006/12

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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

Related research

Keywords: Monopoly; Endogenous supply auctions; Competitive equilibrium; Subgame perfect equilibrium; Strategic market games.;

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