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Perfect Competition in a Bilateral Monopoly
Pradeep Dubey Dieter Sondermann
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Dieter Sondermann: Department of Economics, University of Bonn, Bonn.
Department of Economics Working Papers from Stony Brook University, Department of Economics
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)
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Downloads: (external link) http://www.sunysb.edu/economics/research/papers/2005/Perfectcomp.pdf First version, 2005 (application/pdf)
Related works: Working Paper: Perfect Competition in a Bilateral Monopoly (2003) This item may be available elsewhere in EconPapers: Search for items with the same title.
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Persistent link: http://EconPapers.repec.org/RePEc:nys:sunysb:05-01
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