Cournot-Walras Equilibrium as a Subgame Perfect Equilibrium

Francesca Busetto, Giulio Codognato and Sayantan Ghosal

No 269786, Economic Research Papers from University of Warwick - Department of Economics

Abstract: In this paper, we investigate the problem of the strategic foundation of the Cournot-Walras equilibrium approach. To this end, we respecify `a la Cournot-Walras the mixed version of a model of simultaneous, noncooperative exchange, originally proposed by Lloyd S. Shapley. We show, through an example, that the set of the CournotWalras equilibrium allocations of this respecification does not coincide with the set of the Cournot-Nash equilibrium allocations of the mixed version of the original Shapley’s model. As the nonequivalence, in a one-stage setting, can be explained by the intrinsic two-stage nature of the Cournot-Walras equilibrium concept, we are led to consider a further reformulation of the Shapley’s model as a two-stage game, where the atoms move in the first stage and the atomless sector moves in the second stage. Our main result shows that the set of the CournotWalras equilibrium allocations coincides with a specific set of subgame perfect equilibrium allocations of this two-stage game, which we call the set of the Pseudo-Markov perfect equilibrium allocations.

Keywords: Public Economics; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Pages: 23
Date: 2008-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Working Paper: Cournot-Walras Equilibrium as a Subgame Perfect Equilibrium (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269786

DOI: 10.22004/ag.econ.269786

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