Busetto, Francesca, Codognato, Giulio and Ghosal, Sayantan . (2008) Cournot-Walras equilibrium as a subgame perfect equilibrium. International Journal of Game Theory, Volume 37 (Number 3). pp. 371-386. ISSN 0020-7276

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Abstract

In this paper, we investigate the problem of the strategic foundation of the Cournot-Walras equilibrium approach. To this end, we respecify a la Cournot-Walras the mixed version of a model of simultaneous, noncooperative exchange, originally proposed by Lloyd S. Shapley. We show, through an example, that the set of the Cournot-Walras equilibrium allocations of this respecification does not coincide with the set of the Cournot-Nash equilibrium allocations of the mixed version of the original Shapley's model. As the nonequivalence, in a one-stage setting, can be explained by the intrinsic two-stage nature of the Cournot-Walras equilibrium concept, we are led to consider a further reformulation of the Shapley's model as a two-stage game, where the atoms move in the first stage and the atomless sector moves in the second stage. Our main result shows that the set of the Cournot-Walras equilibrium allocations coincides with a specific set of subgame perfect equilibrium allocations of this two-stage game, which we call the set of the Pseudo-Markov perfect equilibrium allocations.

Item Type:	Journal Article
Subjects:	H Social Sciences > HB Economic Theory Q Science > QA Mathematics
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Game theory, Noncooperative games (Mathematics), Equilibrium (Economics)
Journal or Publication Title:	International Journal of Game Theory
Publisher:	Springer
ISSN:	0020-7276
Date:	November 2008
Volume:	Volume 37
Number:	Number 3
Number of Pages:	16
Page Range:	pp. 371-386
Identification Number:	10.1007/s00182-008-0123-8
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Version or Related Resource:	Busettoy, F., Codognatoz, G., and Ghosal, S. (2008). Cournot-Walras equilibrium as a subgame perfect equilibrium. [Coventry]: University of Warwick, Department of Economics. (Warwick economic research papers, no.837). http://wrap.warwick.ac.uk/id/eprint/219
Related URLs:	Related item in WRAP
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URI:	http://wrap.warwick.ac.uk/id/eprint/29123

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