A model of market-making
The two essential features of a decentralized economy taken into account are, first, that individual agents need some information about other agents in order to meet potential trading partners, which requires some communication or interaction between these agents, and second, that in general agents will face trading uncertainty. We consider trade in a homogeneous commodity. Firms decide upon their effective supplies, and may create their own markets by sending information signals communicating their willingness to sell. Meeting of potential trading partners is arranged in the form of shopping by consumers. The questions to be considered are: How do firms compete in such markets? And what are the properties of an equilibrium? We establish existence conditions for a symmetric Nash equilibrium in the firms' strategies, and analyze its characteristics. The developed framework appears to lend itself well to study many typical phenomena of decentralized economies, such as the emergence of central markets, the role of middlemen, and price-making.
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.:
- John G. Riley & Richard Zeckhauser, 1980. "Optimal Selling Strategies:," UCLA Economics Working Papers 180, UCLA Department of Economics.
- Foley, Duncan K, 1975. "On Two Specifications of Asset Equilibrium in Macroeconomic Models," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 303-24, April.
- Shubik, Martin, 1975. "The General Equilibrium Model Is Incomplete and Not Adequate for the Reconciliation of Micro and Macroeconomic Theory," Kyklos, Wiley Blackwell, vol. 28(3), pages 545-73.
- Diamond, Peter A, 1982.
"Aggregate Demand Management in Search Equilibrium,"
Journal of Political Economy,
University of Chicago Press, vol. 90(5), pages 881-94, October.
- Ionnides, Yannis M, 1990. "Trading Uncertainty and Market Form," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 619-38, August.
- Gould, John P, 1980. "The Economics of Markets: A Simple Model of the Market-making Process," The Journal of Business, University of Chicago Press, vol. 53(3), pages S167-87, July.
- Judd, Kenneth L., 1997.
"Computational economics and economic theory: Substitutes or complements?,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 21(6), pages 907-942, June.
- Kenneth L. Judd, 1997. "Computational Economics and Economic Theory: Substitutes or Complements," NBER Technical Working Papers 0208, National Bureau of Economic Research, Inc.
- Drazen, Allan, 1980. "Recent Developments in Macroeconomic Disequilibrium Theory," Econometrica, Econometric Society, vol. 48(2), pages 283-306, March.
- Douglas Gale, 2010.
"Limit theorems for markets with sequential bargaining,"
Levine's Working Paper Archive
621, David K. Levine.
- Gale, Douglas, 1987. "Limit theorems for markets with sequential bargaining," Journal of Economic Theory, Elsevier, vol. 43(1), pages 20-54, October.
- Green, Jerry, 1980. "On the Theory of Effective Demand," Economic Journal, Royal Economic Society, vol. 90(358), pages 341-53, June.
- GARY-BOBO, R. & LESNE, J.-Ph., 1988. "Advertising strategies and competition in a Chamberlinian market model," CORE Discussion Papers 1988026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
When requesting a correction, please mention this item's handle: RePEc:upf:upfgen:184. 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: ()
If references are entirely missing, you can add them using this form.