IDEAS home Printed from https://ideas.repec.org/a/ucp/jpolec/v109y2001i4p842-863.html
   My bibliography  Save this article

Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price

Author

Listed:
  • Gianni De Fraja
  • Jozsef Sakovics

Abstract

We extend the standard analysis of decentralized markets to allow for the possibility that traders interact simultaneously with more than one trader on the opposite side of the market. In contrast with the literature, we reconcile the Walrasian equilibrium with the outcome of decentralized strategic trade: we show that there exist generic matching technologies that determine local market conditions such that, as market frictions vanish, the equilibrium price is the one that would result in the static Walrasian market. Our analysis highlights the importance of local market conditions for the determination of equilibrium prices.

Suggested Citation

  • Gianni De Fraja & Jozsef Sakovics, 2001. "Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 842-863, August.
    • Handle: RePEc:ucp:jpolec:v:109:y:2001:i:4:p:842-863
    DOI: 10.1086/322087
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/322087
    File Function: main text
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/322087?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Douglas Gale, 1988. "Price Setting and Competition in a Simple Duopoly Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(4), pages 729-739.
    2. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
    3. Harstad, Ronald M. & Kagel, John H. & Levin, Dan, 1990. "Equilibrium bid functions for auctions with an uncertain number of bidders," Economics Letters, Elsevier, vol. 33(1), pages 35-40, May.
    4. McAfee, R. Preston & McMillan, John, 1987. "Auctions with a stochastic number of bidders," Journal of Economic Theory, Elsevier, vol. 43(1), pages 1-19, October.
    5. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
    6. Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
    7. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    8. Melvyn G. Coles & Abhinay Muthoo, 1998. "Strategic Bargaining and Competitive Bidding in a Dynamic Market Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(2), pages 235-260.
    9. De Fraja, Gianni & Muthoo, Abhinay, 2000. "Equilibrium Partner Switching in a Bargaining Model with Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 849-869, November.
    10. Curtis R. Taylor, 1995. "The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 837-855.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yildiz, Muhamet, 2003. "Walrasian bargaining," Games and Economic Behavior, Elsevier, vol. 45(2), pages 465-487, November.
    2. Simon Grant & Atsushi Kajii & Flavio Menezes & Matthew J. Ryan, 2006. "Auctions with options to re‐auction," International Journal of Economic Theory, The International Society for Economic Theory, vol. 2(1), pages 17-39, March.
    3. Mark Satterthwaite & Artyom Shneyerov, 2003. "Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition," Discussion Papers 1384, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    4. Cao, Xiaoyong & Tian, Guoqiang, 2007. "Second-price Auction with Two-Dimensional Private Information on Values and Participation Costs," MPRA Paper 41224, University Library of Munich, Germany.
    5. Mitsutoshi M. Adachi, 1998. "A note on frictions in the Bazaar type bargaining game," Investigaciones Economicas, Fundación SEPI, vol. 22(2), pages 293-304, May.
    6. Yusuke Matsuki, 2016. "A Distribution-Free Test of Monotonicity with an Application to Auctions," Working Papers e110, Tokyo Center for Economic Research.
    7. Tanguy, ISAAC, 2006. "Information revelation in markets with pairwise meetings : dynamic case with constant entry flow," Discussion Papers (ECON - Département des Sciences Economiques) 2006026, Université catholique de Louvain, Département des Sciences Economiques.
    8. Marco Bassetto, 2002. "A Game-Theoretic View of the Fiscal Theory of the Price Level," Econometrica, Econometric Society, vol. 70(6), pages 2167-2195, November.
    9. Dávila, J. & Eeckhout, J., 2008. "Competitive bargaining equilibrium," Journal of Economic Theory, Elsevier, vol. 139(1), pages 269-294, March.
    10. Raskovich, Alexander, 2007. "Ordered bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 1126-1143, October.
    11. Ewa Gałecka-Burdziak, 2012. "Labour market matching – the case of Poland," Bank i Kredyt, Narodowy Bank Polski, vol. 43(3), pages 31-46.
    12. Guillaume Rocheteau & Pierre‐Olivier Weill, 2011. "Liquidity in Frictional Asset Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s2), pages 261-282, October.
    13. Boosey, Luke & Brookins, Philip & Ryvkin, Dmitry, 2017. "Contests with group size uncertainty: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 105(C), pages 212-229.
    14. Milchtaich, Igal, 2004. "Random-player games," Games and Economic Behavior, Elsevier, vol. 47(2), pages 353-388, May.
    15. Kunimoto, Takashi & Serrano, Roberto, 2004. "Bargaining and competition revisited," Journal of Economic Theory, Elsevier, vol. 115(1), pages 78-88, March.
    16. Stephan Lauermann, 2013. "Dynamic Matching and Bargaining Games: A General Approach," American Economic Review, American Economic Association, vol. 103(2), pages 663-689, April.
    17. Cao, Xiaoyong & Tian, Guoqiang, 2010. "Equilibria in first price auctions with participation costs," Games and Economic Behavior, Elsevier, vol. 69(2), pages 258-273, July.
    18. Jason Allen & Robert Clark & Brent Hickman & Eric Richert, 2019. "Resolving Failed Banks: Uncertainty, Multiple Bidding & Auction Design," Staff Working Papers 19-30, Bank of Canada.
    19. Mark Isaac & Svetlana Pevnitskaya & Kurt S. Schnier, 2012. "Individual Behavior And Bidding Heterogeneity In Sealed Bid Auctions Where The Number Of Bidders Is Unknown," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 516-533, April.
    20. Flavio Menezes & Paulo Klinger Monteiro, 1996. "A Note on Auctions with Endogenous Participation," Microeconomics 9610003, University Library of Munich, Germany, revised 31 Oct 1996.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jpolec:v:109:y:2001:i:4:p:842-863. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JPE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.