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On the Equivalence of Walrasian and Non-Walrasian Equilibria in Contract Markets: The case of Complete Contracts

  • Michael Peters

This paper explores two models of an economy in which contracts are exchanged. In the first version contracts are exchanged on a competitive market in which traders expectations concerning conditions that prevail within specific markets adjust until markets `clear'. In the second model contract designers compete directly against one another by offering alternate contracts. It is shown that Walrasian allocations correspond with the equilibrium allocations in the model with direct competition when the number of traders is made large. Furthermore, the expectational assumptions that drive the Walrasian analysis coincide with off the equilibrium path conjectures in the problem with direct competition.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number peters-95-01.

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Length: 45 pages
Date of creation: 11 Jul 1995
Date of revision:
Handle: RePEc:tor:tecipa:peters-95-01
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  1. Dale Mortensen, 1984. "Job Search and Labor Market Analysis," Discussion Papers 594, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Carlton, Dennis W, 1978. "Market Behavior with Demand Uncertainty and Price Inflexibility," American Economic Review, American Economic Association, vol. 68(4), pages 571-87, September.
  3. Hahn, Frank, 1978. "On Non-Walrasian Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 45(1), pages 1-17, February.
  4. James Peck, 1995. "Competition in Transactions Mechanisms: The Emergence of Price Competition," Working Papers 022, Ohio State University, Department of Economics.
  5. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  6. Peters Michael, 1994. "Equilibrium Mechanisms in a Decentralized Market," Journal of Economic Theory, Elsevier, vol. 64(2), pages 390-423, December.
  7. Peters, Michael, 1997. "A Competitive Distribution of Auctions," Review of Economic Studies, Wiley Blackwell, vol. 64(1), pages 97-123, January.
  8. Gale, Douglas, 1992. "A Walrasian Theory of Markets with Adverse Selection," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 229-55, April.
  9. Gale, Douglas, 1996. "Equilibria and Pareto Optima of Markets with Adverse Selection," Economic Theory, Springer, vol. 7(2), pages 207-35, February.
  10. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  11. Holzer, Harry J & Katz, Lawrence F & Krueger, Alan B, 1991. "Job Queues and Wages," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 739-68, August.
  12. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
  13. Wilson, Robert B, 1989. "Efficient and Competitive Rationing," Econometrica, Econometric Society, vol. 57(1), pages 1-40, January.
  14. Ehud Kalai & Ehud Lehrer, 1993. "Subjective Games and Equilibria: I+," Discussion Papers 1077, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Hosios, Arthur J, 1990. "Factor Market Search and the Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 325-55, April.
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