Comparative statics in a simple class of strategic market games |
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| Authors: | Rabah Amir Francis Bloch |
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| Institution: | 1. Department of Economics, University of Arizona, Tucson, AZ 85721, USA;2. GREQAM, Aix-Marseille Universités, France;1. Department of Quantitative Economics, Maastricht University, P.O. Box 616, 6200MD Maastricht, The Netherlands;2. Department of Knowledge Engineering, Maastricht University, P.O. Box 616, 6200MD Maastricht, The Netherlands;1. University of Hagen, Department of Economics, Universitaetsstrasse 41, 58097 Hagen, Germany;2. University of Hannover, School of Economics and Management, Koenigsworther Platz 1, 30167 Hannover, Germany;1. Department of Economics, Massachusetts Institute of Technology, United States;2. Department of Economics, University of Birmingham, United Kingdom |
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| Abstract: | This paper investigates the effects of entry in two-sided markets where buyers and sellers act strategically. Applying new tools from supermodular optimization/games, sufficient conditions for different comparative statics results are obtained. While normality of one good is sufficient for the equilibrium price to be increasing in the number of buyers, normality of both goods is required for equilibrium bids and sellers' equilibrium utilities to be increasing in the number of buyers. When the economy is replicated, normality of both goods and gross substitutes guarantee that the equilibrium of the strategic market game converges monotonically (in quantities) to the competitive equilibrium. Simple counter-examples are provided to settle other potential conjectures of interest. |
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