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On Shapley-Shubik Equilibria with Financial Markets

Author

Listed:
  • Gaël Giraud

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Hubert Stahn

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we extend the Shapley-Shubik model to a two period financial economy, and essentially address the question of the existence of an equilibrium. More precisely, we show the existence of nice equilibria, i.e. situations in which prices for both assets and commodities are strictly positive. Even if the general lines of the proof are largely influenced by the paper of Dubey and Shubik (J Econ Theory 17:1-20, 1978), most of the arguments are new because of the financial nature of the economy. It forces us to deal with a generalized Nash equilibrium, and to proscribe the use of arguments which only work with a single cash-in-advance constraint.

Suggested Citation

  • Gaël Giraud & Hubert Stahn, 2008. "On Shapley-Shubik Equilibria with Financial Markets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00306459, HAL.
    • Handle: RePEc:hal:cesptp:hal-00306459
    DOI: 10.1007/s00199-007-0245-4
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    References listed on IDEAS

    as
    1. Leonidas Koutsougeras & Konstantinos Papadopoulos, 2004. "Arbitrage and equilibrium in strategic security markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(3), pages 553-568, March.
    2. John Geanakoplos & Heracles M. Polemarchakis, 1985. "Existence, Regularity, and Constrained Suboptimality of Competitive Allocations When the Asset Market Is Incomplete," Cowles Foundation Discussion Papers 764, Cowles Foundation for Research in Economics, Yale University.
    3. 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.
    4. 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.
    5. Peck, James & Shell, Karl, 1990. "Liquid markets and competition," Games and Economic Behavior, Elsevier, vol. 2(4), pages 362-377, December.
    6. Amir, Rabah & Sahi, Siddharta & Shubik, Martin & Yao, Shuntian, 1990. "A strategic market game with complete markets," Journal of Economic Theory, Elsevier, vol. 51(1), pages 126-143, June.
    7. Dubey, Pradeep & Shubik, Martin, 1978. "A theory of money and financial institutions. 28. The non-cooperative equilibria of a closed trading economy with market supply and bidding strategies," Journal of Economic Theory, Elsevier, vol. 17(1), pages 1-20, February.
    8. 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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    Cited by:

    1. Kannai, Yakar & Rosenmüller, Joachim, 2010. "Strategic behavior in financial markets," Journal of Mathematical Economics, Elsevier, vol. 46(2), pages 148-162, March.
    2. Rabah Amir & Sergei Belkov & Igor V. Evstigneev & Thorsten Hens, 2022. "An evolutionary finance model with short selling and endogenous asset supply," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(2), pages 655-677, April.
    3. 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.

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    More about this item

    Keywords

    Shapley-Shubik equilibria; Strategic market games; Financial markets; Shapley-Shubik equilibria.; marchés financiers; équilibres de Shapley-Shubik.; Jeux stratégiques de marchés;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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