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Arbitrage equilibria in large games with many commodities

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  • Toraubally, Waseem A.

Abstract

Can identical goods sell at different prices in identical markets when people are perfectly mobile? We provide a formal account of strategic behaviour in large games with many commodities, and exhibit how it drives price dispersion at equilibrium. Interactions between agents are modelled using a Shapley–Shubik market game. We demonstrate the failure of the law of one price in this setup through a robust counterexample. The proposed model, and our findings, constitute an alternative and plausible explanation to some “anomalies” which routinely appear in a wide array of fields, ranging from banking, business economics, to international, and labour economics.

Suggested Citation

  • Toraubally, Waseem A., 2019. "Arbitrage equilibria in large games with many commodities," Economics Letters, Elsevier, vol. 179(C), pages 24-28.
    • Handle: RePEc:eee:ecolet:v:179:y:2019:i:c:p:24-28
    DOI: 10.1016/j.econlet.2019.03.004
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    Cited by:

    1. Toraubally, Waseem A., 2024. "Quantity competition in Hotellings linear city," CRETA Online Discussion Paper Series 87, Centre for Research in Economic Theory and its Applications CRETA.
    2. Toraubally, Waseem A., 2022. "Strategic trading and Ricardian comparative advantage," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 428-447.
    3. Toraubally, Waseem A., 2023. "Comparative advantage with many goods: New treatment and results," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1188-1201.

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    More about this item

    Keywords

    Oligopoly; Infinite-dimensional commodity space; Arbitrage; Strategic behaviour;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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