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Marginal Cost Pricing When Spot Markets Are Complete

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  • Eden, Benjamin

Abstract

The standard formulation of a spot mark et subject to uncertain excess demand uses a tatonnement process that restricts trade until the market-clearing price is found. I present a model in which there is no restriction on trade during the process of the resolution of uncertainty about aggregate excess demand. the idea is to enlarge the commodity space and define goods by the probability that they will sell, in addition to other characteristics. The probability of sale characteristic is the spot market analogue of the contingencies under which delivery will take place in the Arrow-Debreu model. A failure to distinguish goods by the probability of sale characteristic can lead to the rejection of the competitive paradigm. Copyright 1990 by University of Chicago Press.

Suggested Citation

  • Eden, Benjamin, 1990. "Marginal Cost Pricing When Spot Markets Are Complete," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1293-1306, December.
  • Handle: RePEc:ucp:jpolec:v:98:y:1990:i:6:p:1293-1306
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    References listed on IDEAS

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    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, pages 777-795.
    2. Joskow, Paul L, 1988. "Asset Specificity and the Structure of Vertical Relationships: Empirical Evidence," Journal of Law, Economics, and Organization, Oxford University Press, pages 95-117.
    3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, pages 691-719.
    4. Takayama,Akira, 1985. "Mathematical Economics," Cambridge Books, Cambridge University Press, number 9780521314985, December.
    5. Sergiu Hart, 2006. "Shapley Value," Discussion Paper Series dp421, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    6. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
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