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Partial Equilibrium Analysis in a Market Game:the Strategic Marshallian Cross

Author

Listed:
  • Alex Dickson

    () (Keele University, Department of Economics)

  • Roger Hartley

    () (Keele University, Department of Economics)

Abstract

We show how non-price-taking behavior by agents in partial equilibrium can be analyzed using strategic versions of Marshallian supply and demand curves. There is a Nash equilibrium of a two-good, strategic market game at a given price if and only if the strategic supply and demand curves intersect at that price. This result allows us to prove new existence and uniqueness results for such games, which have previously been obtained only by imposing somewhat restrictive assumptions such as symmetry on each side of the market. It also enables us to show that many conventional comparative statics results of Marshallian analysis survive strategic play by buyers and sellers. Finally, we show that price manipulation in this game always has the effect of reducing supply and demand and that thick markets are almost competitive.

Suggested Citation

  • Alex Dickson & Roger Hartley, 2004. "Partial Equilibrium Analysis in a Market Game:the Strategic Marshallian Cross," Keele Economics Research Papers KERP 2004/07, Centre for Economic Research, Keele University.
  • Handle: RePEc:kee:kerpuk:2004/07
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    File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0407.pdf
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    Cited by:

    1. R Cornes & R Hartley, 2005. "The Geometry of Aggregative Games," The School of Economics Discussion Paper Series 0514, Economics, The University of Manchester.

    More about this item

    Keywords

    Strategic Market Game; Imperfect Competition; Marshallian Cross;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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