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A remark on the number of trading posts in strategic market games

Author

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  • KOUTSOUGERAS, Leonidas C.

    (School of Economic Studies, University of Manchester and Department of Econometrics, Tilburg University)

Abstract

In market games the one to one correspondence between commodity types and trading posts would be justified if it were true that the set of equilibria is not affected by the number of trading posts postulated at the outset of the model. We show that this is not true. We develop an example which features equilibria where a commodity is simultaneously exchanged in two trading posts at different prices, i.e., equilibria where the 'law of one price' fails when the one to one correspondence between commodities and trading posts is abandoned. Thus, we conclude that the set of equilibria in market games depends non-trivially on the number of trading posts. This conclusion further suggests that an explanation of the structure of trading posts is necessary.

Suggested Citation

  • KOUTSOUGERAS, Leonidas C., 1999. "A remark on the number of trading posts in strategic market games," LIDAM Discussion Papers CORE 1999005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1999005
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1999.html
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    Citations

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    Cited by:

    1. 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.
    2. Régis Breton & Bertrand Gobillard, 2006. "Robustness of equilibrium price dispersion in finite market games," Working Papers hal-04138854, HAL.
    3. Régis Breton & Bertrand Gobillard, 2005. "Robustness of equilibrium price dispersion in finite market games," Post-Print halshs-00257207, HAL.
    4. 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.
    5. 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.
    6. Andrés Carvajal, 2018. "Arbitrage pricing in non-Walrasian financial markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(4), pages 951-978, December.
    7. Koutsougeras, L., 1999. "Market Games with Multiple Trading Posts," Discussion Paper 1999-40, Tilburg University, Center for Economic Research.
    8. KOUTSOUGERAS, Leonidas, 1999. "Market games with multiple trading posts," LIDAM Discussion Papers CORE 1999018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Toraubally, Waseem A., 2022. "Price dispersion and vanilla options in a financial market game," Finance Research Letters, Elsevier, vol. 50(C).
    10. Toraubally, Waseem A., 2018. "Large market games, the law of one price, and market structure," Journal of Mathematical Economics, Elsevier, vol. 78(C), pages 13-26.
    11. Koutsougeras, L., 1999. "Market Games with Multiple Trading Posts," Other publications TiSEM 2c6ceba8-81ce-402f-a3fa-1, Tilburg University, School of Economics and Management.
    12. Giraud, Gael, 2003. "Strategic market games: an introduction," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 355-375, July.

    More about this item

    Keywords

    trading posts; law of one price.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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