Cournot-Walras Equilibrium as a Subgame Perfect Equilibrium

Francesca Busetto, Giulio Codognato and Sayantan Ghosal
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Francesca Busetto: University of Udine
Giulio Codognato: University of Udine

The Warwick Economics Research Paper Series (TWERPS) 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 Cournot-Walras 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 Cournot-Walras 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.

JEL-codes: C72 D51 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2008
New Economics Papers: this item is included in nep-gth and nep-mic
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Citations: View citations in EconPapers (22)

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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:wrk:warwec:837

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