Perfect Competition in a Bilateral Monopoly (In honor of Martin Shubik)

Pradeep Dubey and Dieter Sondermann
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Dieter Sondermann: Department of Economics, University of Bonn, Bonn

No 1534, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We show that if limit orders are required to vary smoothly, then strategic (Nash) equilibria of the double auction mechanism yield competitive (Walras) allocations. It is not necessary to have competitors on any side of any market: smooth trading is a substitute for price wars. In particular, Nash equilibria are Walrasian even in a bilateral monopoly.

Keywords: Limit orders; double auction; Nash equilibria; Walras equilibria; perfect competition; bilateral monopoly; mechanism design (search for similar items in EconPapers)
JEL-codes: C72 D41 D42 D44 D61 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2005-09
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
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Published in Games and Economic Behavior (Special Issue in Honor of Martin Shubik) (January 2009), 65(1), 124-141

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