2008-06-07 papers

on Market Microstructure

Issue of 2008‒06‒07
one paper chosen by
Thanos Verousis

Perfect Competition in an Oligoply (including Bilateral Monopoly) By Pradeep Dubey und Dieter Sondermann

Perfect Competition in an Oligoply (including Bilateral Monopoly)

By:	Pradeep Dubey und Dieter Sondermann
Abstract:	We show that if limit orders are required to vary smoothly, then strategic (Nash) equilibria of the double auction mechanism yield competitive (Walras) allocations. It is not necessary to have competitors on any side of any market: smooth trading is a substitute for price wars. In particular, Nash equilibria are Walrasian even in a bilateral monopoly.
Keywords:	Limit orders, double auction, Nash equilibria, Walras equilibria, mechanism design
JEL:	C72 D41 D44 D61
URL:	http://d.repec.org/n?u=RePEc:bon:bonedp:bgse9_2008&r=mst

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