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|
|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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|Order Information:|| Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA|
References listed on IDEAS
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- Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
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"Price-Quantity Strategic Market Games,"
Cowles Foundation Discussion Papers
520, Cowles Foundation for Research in Economics, Yale University.
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- L. Hurwicz, 1979. "Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 217-225.
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