Arbitrage equilibria in large games with many commodities
Waseem A. Toraubally
Economics Letters, 2019, vol. 179, issue C, 24-28
Can identical goods sell at different prices in identical markets when people are perfectly mobile? We provide a formal account of strategic behaviour in large games with many commodities, and exhibit how it drives price dispersion at equilibrium. Interactions between agents are modelled using a Shapley–Shubik market game. We demonstrate the failure of the law of one price in this setup through a robust counterexample. The proposed model, and our findings, constitute an alternative and plausible explanation to some “anomalies” which routinely appear in a wide array of fields, ranging from banking, business economics, to international, and labour economics.
Keywords: Oligopoly; Infinite-dimensional commodity space; Arbitrage; Strategic behaviour (search for similar items in EconPapers)
JEL-codes: C72 D43 L1 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:179:y:2019:i:c:p:24-28
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