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Competition with Indivisibilities and Few Traders

Cesar Martinelli (), Jianxin Wang () and Weiwei Zheng ()
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Jianxin Wang: Interdisciplinary Center for Economic Science and Department of Economics, George Mason University
Weiwei Zheng: Interdisciplinary Center for Economic Science and Department of Economics, George Mason University

No 1073, Working Papers from George Mason University, Interdisciplinary Center for Economic Science

Abstract: We study minimal conditions for competitive behavior with few agents. We adapt the strategic market game of Dubey (1982), Simon (1984) and Benassy (1986) to an indivisible good environment. We show that all Nash equilibrium outcomes with active trading are competitive if and only if there are at least two intramarginal traders in each side of the market. 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. Moreover, the performance of a sealed-bid auction following the rules of the strategic market game approaches that of its dynamic counterpart, the double auction, over time.

New Economics Papers: this item is included in nep-com, nep-des, nep-exp, nep-gth and nep-mic
Date: 2019-07
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