Perfect competition in an oligopoly (including bilateral monopoly) |
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| Authors: | Pradeep Dubey Dieter Sondermann |
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| Institution: | 1. Department of Business Administration, College of Business, Minot State University, 500 University Ave W, Minot, ND 58707, United States;2. School of Banking and Finance, National Economics University, Hanoi, Vietnam;3. Moscow State University, Russia;4. Department of Applied Statistics, College of Business, New Mexico State University, MSC 3CQ, P.O. Box 30001, Las Cruces, NM 88003-8001, United States;5. Department of Management, College of Business, New Mexico State University, MSC 3DJ, P.O. Box 30001, Las Cruces, NM 88003-8001, United States |
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| Abstract: | We show that if limit orders are required to vary smoothly, then strategic (Nash) equilibria of the double auction mechanism yield competitive (Walras) allocations. It is not necessary to have competitors on any side of any market: smooth trading is a substitute for price wars. In particular, Nash equilibria are Walrasian even in a bilateral monopoly. |
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