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On Equilibria of Bid-Ask Markets

In: Arrow and the Ascent of Modern Economic Theory

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  • Robert B. Wilson

Abstract

Among his many contributions to economic theory, Kenneth Arrow’s studies of general equilibrium are especially important to the continuing development of the fine structure of market-mediated allocation processes. The paradigm of efficient decentralized allocation via market clearing prices developed from the Walrasian model in the long line of research given its greatest impetus by Arrow, Gerard Debreu, and their colleagues. The demonstration that ‘perfectly’ competitive complete markets, characterized by universal price-taking behaviour, can in principle (absent non-convexities, and so on) attain an efficient allocation set the cornerstone of the theory of markets. By establishing the standard against which further studies of imperfectly competitive and incomplete markets are compared, this accomplishment continues to shape the agenda of continuing research on competitive processes.

Suggested Citation

  • Robert B. Wilson, 1987. "On Equilibria of Bid-Ask Markets," Palgrave Macmillan Books, in: George R. Feiwel (ed.), Arrow and the Ascent of Modern Economic Theory, chapter 11, pages 375-414, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-07239-2_11
    DOI: 10.1007/978-1-349-07239-2_11
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    Citations

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    Cited by:

    1. Scott Fay & Robert Zeithammer, 2017. "Bidding for Bidders? How the Format for Soliciting Supplier Participation in NYOP Auctions Impacts Channel Profit," Management Science, INFORMS, vol. 63(12), pages 4324-4344, December.
    2. Sean Crockett, 2013. "Price Dynamics In General Equilibrium Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 421-438, July.
    3. Breuer, Thomas & Jandačka, Martin & Summer, Martin & Vollbrecht, Hans-Joachim, 2015. "Endogenous leverage and asset pricing in double auctions," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 144-160.
    4. Shyam Sunder & MODELS A, 2002. "Markets as Artifacts: Aggregate Efficiency from Zero-Intelligence Traders," Yale School of Management Working Papers ysm284, Yale School of Management, revised 01 Sep 2004.
    5. Cason, Timothy N. & Friedman, Daniel, 1996. "Price formation in double auction markets," Journal of Economic Dynamics and Control, Elsevier, vol. 20(8), pages 1307-1337, August.
    6. Menezes, Flávio Marques, 1994. "Strategic Behavior in Ascending-Price Multiple-Object Auctions," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 14(1), April.
    7. Corgnet, Brice & DeSantis, Mark & Porter, David, 2020. "The distribution of information and the price efficiency of markets," Journal of Economic Dynamics and Control, Elsevier, vol. 110(C).
    8. Steven Gjerstad, 2003. "The Impact of Pace in Double Auction Bargaining," Levine's Bibliography 666156000000000192, UCLA Department of Economics.
    9. Vernon L. Smith, 2003. "Constructivist and Ecological Rationality in Economics," American Economic Review, American Economic Association, vol. 93(3), pages 465-508, June.
    10. Steven Gjerstad & Jason M. Shachat, 2007. "Individual Rationality and Market Efficiency," Purdue University Economics Working Papers 1204, Purdue University, Department of Economics.
    11. Corgnet, Brice & DeSantis, Mark & Porter, David, 2020. "The distribution of information and the price efficiency of markets," Journal of Economic Dynamics and Control, Elsevier, vol. 110(C).
    12. Steven Gjerstad, 2003. "The Strategic Impact of Pace in Double Auction Bargaining," Microeconomics 0304001, University Library of Munich, Germany.
    13. Smith, Vernon L., 2010. "Theory and experiment: What are the questions?," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 3-15, January.
    14. Antoni Bosch-Domenech & Shyam Sunder, 2000. "Tracking the Invisible Hand: Convergence of Double Auctions to Competitive Equilibrium," Computational Economics, Springer;Society for Computational Economics, vol. 16(3), pages 257-284, December.
    15. Giuseppe Attanasi & Samuele Centorrino & Elena Manzoni, 2020. "Zero-Intelligence vs. Human Agents: An Experimental Analysis of the Efficiency of Double Auctions and Over-the-Counter Markets of Varying Sizes," Working Papers 05/2020, University of Verona, Department of Economics.
    16. Gjerstad, Steven, 2007. "The competitive market paradox," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1753-1780, May.
    17. Steven Gjerstad, 2013. "Price dynamics in an exchange economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(2), pages 461-500, March.
    18. Gjerstad, Steven & Dickhaut, John, 1998. "Price Formation in Double Auctions," Games and Economic Behavior, Elsevier, vol. 22(1), pages 1-29, January.
    19. Joel I. Singer, 2002. "Double Auctions Across a Constrained Transmission Line," Operations Research, INFORMS, vol. 50(3), pages 449-461, June.

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