Trade in bilateral oligopoly with endogenous market formation

Alex Dickson, Roger Hartley

Research output: Working paper

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Abstract

We study a strategic market game in which traders are endowed
with both a good and money and can choose whether to buy or sell
the good. We derive conditions under which a non-autarkic equilibrium exists and when the only equilibrium is autarky. Autarky is ‘nice’
(robust to small perturbations in the game) when it is the only equilibrium, and ‘very nice’ (robust to large perturbations) when no gains
from trade exist. We characterize economies where autarky is nice but
not very nice; that is, when gains from trade exist and yet no trade
takes place.
Original languageEnglish
Number of pages19
Publication statusUnpublished - 2011

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Keywords

  • bilateral oligopoly
  • endogenous markets
  • autarky

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