Arbitrage Equilibria in Large Games with Many Commodities

Research output: Contribution to journalArticle

Abstract

Can identical goods sell at different prices in identical markets when people are perfectly mobile? We provide a formal account of strategic behaviour in large games with many commodities, and exhibit how it drives price dispersion at equilibrium. Interactions between agents are modelled using a Shapley-Shubik market game. We demonstrate the failure of the law of one price in this setup through a robust counterexample. The proposed model, and our findings, constitute an alternative and plausible explanation to some "anomalies" which routinely appear in a wide array of fields, ranging from banking, business economics, to international, and labour economics.
Original languageEnglish
Pages (from-to)24-28
Number of pages5
JournalEconomics Letters
Volume179
Early online date12 Mar 2019
DOIs
Publication statusPublished - Jun 2019

Fingerprint

International economics
Commodities
Price dispersion
Strategic behavior
Interaction
Large games
Labor economics
Anomaly
Economics
Law of one price
Arbitrage
Market games
Banking

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in Economics Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economics Letters, [179] (2019)] DOI:
10.1016/j.econlet.2019.03.004
© 2019, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

  • Oligopoly
  • Infinite-dimensional commodity space
  • Arbitrage
  • Strategic behaviour

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Cite this

Arbitrage Equilibria in Large Games with Many Commodities. / Toraubally, Waseem.

In: Economics Letters, Vol. 179, 06.2019, p. 24-28.

Research output: Contribution to journalArticle

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