Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price
We extend the standard analysis of decentralized markets allowing for the possibility that traders interact simultaneously with more than one trader on the opposite side if the market. In contrast to the literature, we are able to reconcile the Walrasian equilibrium with the outcome of decentralized strategic trade: we show that there exist generic matching mechanisms which determine local market conditions such that, as market frictions vanish, the expected equilibrium price is the one that would result in the static Walrasian market. At the same time, we highlight the relevance of local market conditions in the determination of equilibrium prices.
|Date of creation:|
|Contact details of provider:|| Postal: 31 Buccleuch Place, EH8 9JT, Edinburgh|
Web page: http://www.econ.ed.ac.uk/
More information through EDIRC
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.:
- McAfee, R. Preston & McMillan, John, 1987. "Auctions with a stochastic number of bidders," Journal of Economic Theory, Elsevier, vol. 43(1), pages 1-19, October.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, July.
- Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
- Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
- Douglas Gale, 1988. "Price Setting and Competition in a Simple Duopoly Model," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 729-739.
- Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
- Melvyn G. Coles & Abhinay Muthoo, 1998.
"Strategic Bargaining and Competitive Bidding in a Dynamic Market Equilibrium,"
Review of Economic Studies,
Oxford University Press, vol. 65(2), pages 235-260.
- Coles, Melvyn G & Muthoo, Abhinay, 1994. "Strategic Bargaining and Competitive Bidding in a Dynamic Market Equilibrium," CEPR Discussion Papers 938, C.E.P.R. Discussion Papers.
- Curtis R. Taylor, 1995. "The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 837-855.
- Harstad, Ronald M. & Kagel, John H. & Levin, Dan, 1990. "Equilibrium bid functions for auctions with an uncertain number of bidders," Economics Letters, Elsevier, vol. 33(1), pages 35-40, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:edn:esedps:36. 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: (Gina Reddie)
If references are entirely missing, you can add them using this form.