Competition with indivisibilities and few traders

Cesar Martinelli, Jianxin Wang () and Weiwei Zheng ()
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Jianxin Wang: Central South University
Weiwei Zheng: European University Institute

Experimental Economics, 2023, vol. 26, issue 1, No 4, 78-106

Abstract: Abstract We study minimal conditions for competitive behavior with few agents. We adapt a price-quantity strategic market game to the indivisible commodity environment commonly used in double auction experiments, and show that all Nash equilibrium outcomes with active trading are competitive if and only if there are at least two buyers and two sellers willing to trade at every competitive price. Unlike previous formulations, this condition can be verified directly by checking the set of competitive equilibria. In laboratory experiments, the condition we provide turns out to be enough to induce competitive results, and the Nash equilibrium appears to be a good approximation for market outcomes. Subjects, although possessing limited information, are able to act as if complete information were available in the market.

Keywords: Market game; Market experiment; Double auction; Perfect competition (search for similar items in EconPapers)
JEL-codes: C92 D41 D42 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Working Paper: Competition with Indivisibilities and Few Traders (2019)
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DOI: 10.1007/s10683-022-09772-9

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