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Smooth Strategic Market Game Mechanisms with Coordinating Market Prices

Listed author(s):
  • Alex Dickson


    (Keele University, Department of Economics)

This paper analyses strategic trade within pure exchange economies. In the tradition of the ‘Shapley-Shubik’ case, the signals agents send to the markets are aggregated into market prices, proceeding which net trades are determined via a distribution mechanism dependent on both individual activity and prices. The pricing and distribution mechanisms we use are abstractly given smooth mappings, which, combined with various axioms, propagate several desirable properties consistent with elementary economic intuition. ‘Active interior’ Nash equilibria in the defined normal form game are characterised in terms of first order conditions, using which we demonstrate that in finite economies, equilibria resulting from trade within the market game are never Walrasian, and, furthermore, they are Pareto inefficient. The convergence of a sequence of active interior Nash equilibria to a Walrasian equilibrium of the underlying competitive economy is also investigated.

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Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2003/03.

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Length: 25 pages
Date of creation: Mar 2003
Handle: RePEc:kee:kerpuk:2003/03
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Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom

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Order Information: Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
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