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ON ‘NICE’ AND ‘VERY NICE’ AUTARKIC EQUILIBRIA IN STRATEGIC MARKET GAMES

Authors

  • ALEX DICKSON,

    1. University of Strathclyde
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  • ROGER HARTLEY

    1. University of Manchester
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    • This paper has been previously circulated in working paper form under the title ‘Trade in bilateral oligopoly with endogenous market formation’. The authors would like to thank two anonymous referees for helpful comments and suggestions, as well as participants at the University of Strathclyde Workshop on Games with an Aggregative Structure and the 11th SAET Conference (Faro).


  • Manuscript received 19.8.11; final version received 17.5.12.

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, i.e. when gains from trade exist and yet no trade takes place.

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