Trade in bilateral oligopoly with endogenous market formation
We study a strategic market game in which traders are endowed with both a good and money and can choose whether to buy or sell the good. We derive conditions under which a non-autarkic equilibrium exists and when the only equilibrium is autarky. Autarky is â€˜niceâ€™ (robust to small perturbations in the game) when it is the only equilibrium, and â€˜very niceâ€™ (robust to large perturbations) when no gains from trade exist. We characterize economies where autarky is nice but not very nice; that is, when gains from trade exist and yet no trade takes place.
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Keele Economics Research Papers
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