A remark on the number of trading posts in strategic market games

Leonidas C. Koutsougeras
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Leonidas C. Koutsougeras: School of Economic Studies, University of Manchester and Department of Econometrics, Tilburg University

No 1999005, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In market games the one to one correspondence between commodity types and trading posts would be justified if it were true that the set of equilibria is not affected by the number of trading posts postulated at the outset of the model. We show that this is not true. We develop an example which features equilibria where a commodity is simultaneously exchanged in two trading posts at different prices, i.e., equilibria where the 'law of one price' fails when the one to one correspondence between commodities and trading posts is abandoned. Thus, we conclude that the set of equilibria in market games depends non-trivially on the number of trading posts. This conclusion further suggests that an explanation of the structure of trading posts is necessary.

Keywords: trading posts; law of one price. (search for similar items in EconPapers)
JEL-codes: C72 (search for similar items in EconPapers)
Date: 1999-01-19
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Citations: View citations in EconPapers (14)

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