Retrading in market games

Ghosal, S., and Morelli, M. (2004) Retrading in market games. Journal of Economic Theory, 115(1), pp. 151-181. (doi:10.1016/S0022-0531(03)00102-9)

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Abstract

When agents are not price takers, they typically cannot obtain an efficient real location of resources in one round of trade. This paper presents a non-cooperative model of imperfect competition where agents can retrade allocations, consistent with Edgeworth's idea of recontracting. We show (a) there are Pareto optimal allocations, including competitive equilibrium allocations, that can be approximated arbitrarily closely when trade is myopic, i.e., when agents play a static Nash equilibrium at every round of retrading; (b) any converging sequence of allocations generated by myopic retrading can be supported along some retrade-proof subgame perfect equilibrium path when traders anticipate future rounds of trading.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Ghosal, Professor Sayantan
Authors: Ghosal, S., and Morelli, M.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Economic Theory
ISSN:0022-0531
ISSN (Online):1095-7235

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