Perfect Competition in a Bilateral Monopoly (In honor of Martin Shubik)
We 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.
|Date of creation:||Sep 2005|
|Date of revision:|
|Publication status:||Published in Games and Economic Behavior (Special Issue in Honor of Martin Shubik) (January 2009), 65(1), 124-141|
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- Sahi, Siddhartha & Yao, Shuntian, 1989. "The non-cooperative equilibria of a trading economy with complete markets and consistent prices," Journal of Mathematical Economics, Elsevier, vol. 18(4), pages 325-346, September.
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