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The law of one price in a modified strategic market game

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  • Nicholas Ziros

    (University of Cyprus)

Abstract

This paper modifies the norms of the strategic market game with multiple trading posts to allow for the distinction of the two roles of prices. In particular, we propose a model with two discrete (endogenous formatted) prices, where prices $$p$$ p help in the assignment of goods in each distinct trading post, whereas prices $$\pi $$ π evaluate the total sales for a commodity. Under this modification, the main result indicates that the disparities of market-clearing prices across trading posts are not compatible with the Nash equilibrium.

Suggested Citation

  • Nicholas Ziros, 2015. "The law of one price in a modified strategic market game," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 233-241, October.
    • Handle: RePEc:spr:etbull:v:3:y:2015:i:2:d:10.1007_s40505-014-0052-6
    DOI: 10.1007/s40505-014-0052-6
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    References listed on IDEAS

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    1. Postlewaite, A & Schmeidler, David, 1978. "Approximate Efficiency of Non-Walrasian Nash Equilibria," Econometrica, Econometric Society, vol. 46(1), pages 127-135, January.
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    3. Bloch, Francis & Ferrer, Helene, 2001. "Trade Fragmentation and Coordination in Strategic Market Games," Journal of Economic Theory, Elsevier, vol. 101(1), pages 301-316, November.
    4. Martin Shubik & Jingang Zhao, 1990. "A Strategic Market Game of a Finite Economy with a Mutual Bank," Cowles Foundation Discussion Papers 961, Cowles Foundation for Research in Economics, Yale University.
    5. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-968, October.
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    8. Koutsougeras, Leonidas C., 2003. "Convergence to no arbitrage equilibria in market games," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 401-420, July.
    9. Koutsougeras, Leonidas C., 2003. "Non-Walrasian equilibria and the law of one price," Journal of Economic Theory, Elsevier, vol. 108(1), pages 169-175, January.
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    More about this item

    Keywords

    Strategic market games; Multiple trading posts; Law of one price;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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