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Uncertainty and insurance in strategic market games

Author

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  • Sonia Weyers

    (Graduate School of Business, Stanford University, Stanford, CA 94305-5015, USA)

Abstract

For perfectly competitive economies under uncertainty, there is a well-known equivalence between a formulation with contingent goods and one with state-specific securities followed by spot markets for goods. In this paper, I examine whether this equivalence carries over to a particular form of imperfect competition. Specifically, I look at three Shapley-Shubik strategic market games: one with contingent commodities, one with Arrow securities traded under imperfect competition and one with Arrow securities traded under perfect competition. First I compare the feasibility constraints of these three games. Then I compare their equilibrium sets. As in Peck and Shell (1989), the only common equilibria between the first and the second game are those which involve no transfer of income across states. However, if the securities markets are competitive, then the set of equilibria of the contingent commodities game and the securities game coincide.

Suggested Citation

  • Sonia Weyers, 1999. "Uncertainty and insurance in strategic market games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(1), pages 181-201.
    • Handle: RePEc:spr:joecth:v:14:y:1999:i:1:p:181-201
    Note: Received: June 16, 1997; revised version: April 30, 1998
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    Citations

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    Cited by:

    1. Dubey, Pradeep & Sondermann, Dieter, 2009. "Perfect competition in an oligopoly (including bilateral monopoly)," Games and Economic Behavior, Elsevier, vol. 65(1), pages 124-141, January.
    2. Gael Giraud & Hubert Stahn, 2013. "Nash-implementation of competitive equilibria via a bounded mechanism," Review of Economic Design, Springer;Society for Economic Design, vol. 17(1), pages 43-62, March.
    3. Gaël Giraud, 2000. "Notes sur les jeux stratégiques de marchés," Cahiers d'Économie Politique, Programme National Persée, vol. 37(1), pages 257-272.
    4. Giraud, Gael, 2003. "Strategic market games: an introduction," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 355-375, July.
    5. Dmitry Levando, 2012. "A Survey Of Strategic Market Games," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 57(194), pages 63-106, July - Se.
    6. Giraud, Gael & Stahn, Hubert, 2003. "Efficiency and imperfect competition with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 559-583, July.
    7. Gaël GIRAUD & Sonia WEYERS, 2003. "Strategic Market Games with a Finite Horizon and Incomplete," Working Papers of BETA 2003-04, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

    More about this item

    Keywords

    Strategic markets games · Organization of markets under uncertainty.;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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