Strategic behavior in financial markets
We describe a financial market as a noncooperative game in strategic form. Agents may borrow or deposit money at a central bank and use the cash available to them in order to purchase a commodity for immediate consumption. They derive positive utility from consumption and from having cash reserves at the end of the day, whereas being bankrupt entails negative utility. The bank fixes interest rates. The existence of Nash equilibria (both mixed and pure) of the ensuing game is proved under various assumptions. In particular, no agent is bankrupt at equilibrium. Asymptotic behavior of replica markets is discussed, and it is shown that given appropriate assumptions, the difference between a strategic player and a price taker is negligible in a large economy.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- M. Shubik & D. Tsomocos, 1992. "A strategic market game with a mutual bank with fractional reserves and redemption in gold," Journal of Economics, Springer, vol. 55(2), pages 123-150, June.
- Dimitrios P. Tsomocos, 2003.
"Equilibrium Analysis, Banking and Financial Instability,"
OFRC Working Papers Series
2003fe08, Oxford Financial Research Centre.
- Tsomocos, Dimitrios P., 2003. "Equilibrium analysis, banking and financial instability," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 619-655, July.
- Dubey, Pradeep & Shapley, Lloyd S., 1994. "Noncooperative general exchange with a continuum of traders: Two models," Journal of Mathematical Economics, Elsevier, vol. 23(3), pages 253-293, May.
- Gaetano Bloise & Jacques Dréze & Herakles Polemarchakis, 2005.
"Monetary equilibria over an infinite horizon,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(1), pages 51-74, 01.
- BLOISE, Gaetano & DREZE, Jacques H. & POLEMARCHAKIS, Herakles M., "undated". "Monetary equilibria over an infinite horizon," CORE Discussion Papers RP 1750, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Gaetano Bloise & J. H. Dreze & H. M. Polemarchakis, 2003. "Monetary Equilibria over an Infinite Horizon," Discussion Papers 03-19, University of Copenhagen. Department of Economics.
- Pradeep Dubey & John Geanakoplos, 2003.
"Monetary Equilibrium with Missing Markets,"
Cowles Foundation Discussion Papers
1389, Cowles Foundation for Research in Economics, Yale University.
- Gaël Giraud & Hubert Stahn, 2008.
"On Shapley-Shubik Equilibria with Financial Markets,"
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
- Gaël Giraud & Hubert Stahn, 2008. "On Shapley–Shubik equilibria with financial markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(3), pages 469-496, June.
- Charles Goodhart & Pojanart Sunirand & Dimitrios P. Tsomocos, 2004.
"A model to analyse financial fragility: applications,"
LSE Research Online Documents on Economics
24680, London School of Economics and Political Science, LSE Library.
- Goodhart, Charles A. E. & Sunirand, Pojanart & Tsomocos, Dimitrios P., 2004. "A model to analyse financial fragility: applications," Journal of Financial Stability, Elsevier, vol. 1(1), pages 1-30, September.
- Charles A.E. Goodhart & Pojanart Sunirand & Dimitrios P. Tsomocos, 2004. "A Model to Analyse Financial Fragility: Applications," OFRC Working Papers Series 2004fe05, Oxford Financial Research Centre.
- Pradeep Dubey & John Geanakoplos & Martin Shubik, 2000. "Default in a General Equilibrium Model with Incomplete Markets," Cowles Foundation Discussion Papers 1247, Cowles Foundation for Research in Economics, Yale University.
- Martin Shubik & Ward Whitt, 1973. "Fiat Money in an Economy with One Nondurable Good and No Credit (A Noncooperative Sequential Game)," Cowles Foundation Discussion Papers 355, Cowles Foundation for Research in Economics, Yale University.
- Geanakoplos, J. & Karatzas, I. & Shubik, M. & Sudderth, W., 2000.
"A strategic market game with active bankruptcy,"
Journal of Mathematical Economics,
Elsevier, vol. 34(3), pages 359-396, November.
- J. Geanakoplos & I. Karatzas & M. Shubik & W. Sudderth, 1999. "A Strategic Market Game with Active Bankruptcy," Working Papers 99-04-025, Santa Fe Institute.
- John Geanakoplos & Ioannis Karatzas & Martin Shubik & William D. Sudderth, 1998. "A Strategic Market Game with Active Bankruptcy," Cowles Foundation Discussion Papers 1183, Cowles Foundation for Research in Economics, Yale University.
- Giraud, Gael, 2003. "Strategic market games: an introduction," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 355-375, July.
When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:46:y:2010:i:2:p:148-162. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.