Equilibrium in a market with intermediation is Walrasian

John Wooders

    Research output: Contribution to journal › Article

    Abstract

    We show that a profit maximizing monopolistic intermediary may behave approximately like a Walrasian auctioneer by setting bid and ask prices nearly equal to Walrasian equilibrium prices. In our model agents choose to trade either through the intermediary or privately. Buyers (sellers) trading through the intermediary potentially trade immediately at the ask (bid) price, but sacrifice the spread as gains. A buyer or seller who trades privately shares all the gains to trade with this trading partner, but risks costly delay in finding a partner. We show that as the cost of delay vanishes, the equilibrium bid and ask prices converge to the Walrasian equilibrium prices.

    Original languageEnglish (US)
    Pages (from-to)75-89
    Number of pages15
    JournalReview of Economic Design
    Volume3
    Issue number1
    DOIs
    StatePublished - Jan 1 1997

    Fingerprint

    Intermediation
    Bid
    Intermediaries
    Walrasian equilibrium
    Equilibrium price
    Seller
    Buyers
    Costs
    Profit

    Keywords

    • Ask
    • Bid
    • Intermediation
    • Matching
    • Walrasian equilibrium

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

    Cite this

    Equilibrium in a market with intermediation is Walrasian. / Wooders, John.

    In: Review of Economic Design, Vol. 3, No. 1, 01.01.1997, p. 75-89.

    Research output: Contribution to journal › Article

    Wooders, J 1997, 'Equilibrium in a market with intermediation is Walrasian', Review of Economic Design, vol. 3, no. 1, pp. 75-89. https://doi.org/10.1007/s100580050006
    Wooders J. Equilibrium in a market with intermediation is Walrasian. Review of Economic Design. 1997 Jan 1;3(1):75-89. https://doi.org/10.1007/s100580050006
    Wooders, John. / Equilibrium in a market with intermediation is Walrasian. In: Review of Economic Design. 1997 ; Vol. 3, No. 1. pp. 75-89.
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