Title

Perfect Competition in a Bilateral Monopoly (In Honor of Martin Shubik)

Document Type

Discussion Paper

Publication Date

9-1-2005

CFDP Number

1534

CFDP Pages

24

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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