Perfect Competition in a Bilateral Monopoly
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 Stony Brook University, Department of Economics in its series Department of Economics Working Papers with number 05-01.
Length: 24 pages.
Date of creation: 21 Mar 2005
Date of revision:
Limit orders; double auction; Nash equilibria; Walras equilibria; perfect competition; bilateral monopoly; mechanism design;
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
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