Robustness of equilibrium price dispersion in finite market games

Breton, Régis and Gobillard, Bertrand (2011) Robustness of equilibrium price dispersion in finite market games. TSE Working Paper, n. 11-308

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Official URL: http://tse-fr.eu/pub/25836

Abstract

We propose an approach to restricting the set of equilibria in a market game and use
it to assess the robustness of the price dispersion results obtained by Koutsougeras
[2003, J. Econ. Theory 108, 169–175] in the multiple trading posts setup. More
precisely, we perturb the initial game by the introduction of transaction costs and
our main results are the following. (i) No equilibrium with price dispersion of
the game with costless transactions can be approached by equilibria with positive
transaction costs as costs get arbitrarily small. (ii) When this type of perturbation
is considered the set of equilibrium outcomes is not affected by the number of
trading posts. In addition, the analysis hints at conditions required for non-zero
transaction costs to serve as a source of price dispersion in this class of exchange
economies.

Item Type: Monograph (Working Paper)
Language: English
Date: August 2011
Uncontrolled Keywords: Strategic market games, law of one price, perturbed games, equilibrium refinement
JEL codes: C72 - Noncooperative Games
D43 - Oligopoly and Other Forms of Market Imperfection
D50 - General
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:25
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:25836
URI: http://publications.ut-capitole.fr/id/eprint/15288

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