TY - JOUR

T1 - Repeated trade and the velocity of money

AU - Dubey, Pradeep

AU - Sahi, Siddharta

AU - Shubik, Martin

N1 - Funding Information:
Princeton, NJ 08544, USA. *Research supported in part by NSF Grants

PY - 1993

Y1 - 1993

N2 - There are two sources of inefficiency of strategic equilibria (SE) in market mechanisms. The first is the oligopolistic effect, which occurs when an agent can single-handedly influence prices. With a continuum of agents we get 'perfect competition' and this effect is, of course, wiped out. But the inefficiency of SEs may nevertheless persist because agents are not 'perfect liquid', i.e., the constraints of the mechanism are such that they cannot carry out arbitrary trades at the market prices. Our main result is a formal proof of the fact that, if enough repeated rounds of trade are permitted within a single utility period, then the liquidity problem is overcome: SE outcomes turn out to be not only efficient but, in fact, Walrasian.

AB - There are two sources of inefficiency of strategic equilibria (SE) in market mechanisms. The first is the oligopolistic effect, which occurs when an agent can single-handedly influence prices. With a continuum of agents we get 'perfect competition' and this effect is, of course, wiped out. But the inefficiency of SEs may nevertheless persist because agents are not 'perfect liquid', i.e., the constraints of the mechanism are such that they cannot carry out arbitrary trades at the market prices. Our main result is a formal proof of the fact that, if enough repeated rounds of trade are permitted within a single utility period, then the liquidity problem is overcome: SE outcomes turn out to be not only efficient but, in fact, Walrasian.

UR - http://www.scopus.com/inward/record.url?scp=38249004788&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=38249004788&partnerID=8YFLogxK

U2 - 10.1016/0304-4068(93)90042-J

DO - 10.1016/0304-4068(93)90042-J

M3 - Article

AN - SCOPUS:38249004788

SN - 0304-4068

VL - 22

SP - 125

EP - 137

JO - Journal of Mathematical Economics

JF - Journal of Mathematical Economics

IS - 2

ER -