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Trade rules for uncleared markets

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  • Kibris, Ozgur
  • Kucuksenel, Serkan

Abstract

We analyze markets in which the price of a traded commodity is such that the supply and the demand are unequal. Under standard assumptions, the agents then have single peaked preferences on their consumption or production choices. For such markets, we propose a class of Uniform Trade rules each of which determines the volume of trade as the median of total demand, total supply, and an exogenous constant. Then these rules allocate this volume 'uniformly' on either side of the market. We evaluate these 'trade rules' on the basis of some standard axioms in the literature. We show that they uniquely satisfy Pareto optimality, strategy proofness, no-envy, and an informational simplicity axiom that we introduce. We also analyze the implications of anonymity, renegotiation proofness, and voluntary trade on this domain.
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Suggested Citation

  • Kibris, Ozgur & Kucuksenel, Serkan, 2005. "Trade rules for uncleared markets," Working Papers 1232, California Institute of Technology, Division of the Humanities and Social Sciences.
    • Handle: RePEc:clt:sswopa:1232
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    References listed on IDEAS

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    1. Bettina Klaus & Hans Peters & Ton Storcken, 1997. "Reallocation of an infinitely divisible good," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(2), pages 305-333.
    2. Sprumont, Yves, 1991. "The Division Problem with Single-Peaked Preferences: A Characterization of the Uniform Allocation Rule," Econometrica, Econometric Society, vol. 59(2), pages 509-519, March.
    3. Thomson William, 1994. "Consistent Solutions to the Problem of Fair Division When Preferences Are Single-Peaked," Journal of Economic Theory, Elsevier, vol. 63(2), pages 219-245, August.
    4. Barbera, Salvador & Jackson, Matthew O, 1995. "Strategy-Proof Exchange," Econometrica, Econometric Society, vol. 63(1), pages 51-87, January.
    5. Bettina Klaus & Hans Peters & Ton Storcken, 1998. "Strategy-proof division with single-peaked preferences and individual endowments," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(2), pages 297-311.
    6. Ching, Stephen, 1992. "A simple characterization of the uniform rule," Economics Letters, Elsevier, vol. 40(1), pages 57-60, September.
    7. Thomson, W., 1991. "Resource-Monotonic Solutions to the Problem of Fair Divosion when Preferences are Single-Peaked ," RCER Working Papers 301, University of Rochester - Center for Economic Research (RCER).
    8. H. Moulin, 1980. "On strategy-proofness and single peakedness," Public Choice, Springer, vol. 35(4), pages 437-455, January.
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    Cited by:

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    3. Mennicken, Andrea, 2010. "From inspection to auditing: Audit and markets as linked ecologies," Accounting, Organizations and Society, Elsevier, vol. 35(3), pages 334-359, April.
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    More about this item

    Keywords

    market disequilibrium; trade rule; efficiency; strategy proofness; Anonymity; no-envy; renegotiation proofness; voluntary trade;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D6 - Microeconomics - - Welfare Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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