Large Market Games, the Law of One Price, and Market Structure

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper introduces a new class of market games featuring multiple posts per commodity, in which trading posts are privately owned. It is demonstrated via three robust counterexamples, that in this setting the law of one price fails, thus showing, contrary to longstanding belief in the literature, that price dispersion in large market games is extremely robust. Most importantly, it is established that even in economies with a continuum of small agents and infinitely many atoms (all of whom can arbitrage prices if they so wish), and an infinite number of markets per commodity, the set of equilibria—and the resulting market structure—is influenced, both by strategic behaviour, and private ownership of posts.

Original languageEnglish
Pages (from-to)13-26
Number of pages14
JournalJournal of Mathematical Economics
Volume78
Early online date10 Jul 2018
DOIs
Publication statusPublished - Oct 2018

Fingerprint

Game
Atoms
Arbitrage
Counterexample
Continuum
Market
Market structure
Commodities
Law of one price
Market games
Private ownership
Price dispersion
Strategic behavior
Trading post
Beliefs
Class

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Mathematical Economics. 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 Journal of Mathematical Economics, Vol 78 (2018) DOI: 10.1016/j.jmateco.2018.06.007

© 2017, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

  • Large economies
  • Arbitrage equilibria
  • Law of one price

Cite this

Large Market Games, the Law of One Price, and Market Structure. / Toraubally, Waseem.

In: Journal of Mathematical Economics, Vol. 78, 10.2018, p. 13-26.

Research output: Contribution to journalArticle

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